Market Failure

Which of the following is NOT a reason for market failure?

• Presence of Public Goods

• Presence of Positive Externalities

• Perfectly competitive markets

• Incomplete markets

Which of the following conditions lead to emergence of natural monopoly?

• Low fixed cost

• High fixed cost

• Low variable cost

• High variable cost

When is competition likely to be limited?

• No transportation cost

• Perfect information to all the participants

• Presence of large number of firms

• Presence of patents

There is inefficiency (in terms of output) associated with Perfect competition.

• True

• False

In the presence of natural monopoly, it is profitable to produce output at a point at which Price is equal to Long run marginal cost.

• True

• False

In Public goods, what is meant by the property of non-rivalry?

• Marginal cost of an additional user is high

• Marginal cost of an additional user is zero

• Marginal cost is high

• Marginal cost is zero

Provision of Street-light by markets could lead to :

• Undersupply of streetlights

• Oversupply of streetlights

• Optimal supply of streetlights

• No supply of streetlights

Will the firm generating externality depicted by the above diagram, overproduce or underproduce the good?

• Overproduce

• Underproduce

Which of the following are reasons for markets to be incomplete?

• Undersupply of Innovation

• Presence of Asymmetric information

• Both of them

• None of them

What do you understand by the term "market failure"?

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