7.2 Market Failures-pd 6

What serious economic fact does the Enron story highlight?

• Markets sometimes fail
• Government regulations are always effective
• Markets are always efficient
• Companies always follow the law
• The economy never faces failures

Which other company faced an accounting scandal around the same time as Enron?

• WorldCom
• Microsoft
• Apple
• IBM
• Facebook

What did WorldCom have to declare in 2002 due to legal issues?

• Bankruptcy
• Profit
• Loss
• Stock buybacks
• Acquisition

What did the Enron and WorldCom scandals demonstrate about a competitive free enterprise economy?

• It works best when several conditions are met
• It always works without regulation
• It only works with perfect competition
• It fails when information is inadequate
• It functions best without government intervention

What condition is mentioned as essential for a competitive economy to function effectively?

• Adequate information
• Unlimited resources
• Government control
• High taxes
• Strong market monopolies

What should we be able to identify and deal with to prevent future economic problems?

• Different types of market failures
• Weak regulatory policies
• Global competition
• Economic inequality
• Government bailouts

What happened to WorldCom in 2002?

• It declared bankruptcy
• It launched a major product
• It merged with a competitor
• It became the market leader
• It was fully acquitted

What was the main reason for the downfall of WorldCom in 2002?

• Breaking the law
• Poor marketing strategies
• Market oversaturation
• High operational costs
• Lack of innovation

What does the text suggest is necessary for preventing future scandals like Enron's?

• Identifying and dealing with market failures
• Strict government oversight
• Limiting corporate profits
• Lowering taxes
• Promoting monopolies

What is the primary lesson of the Enron scandal as mentioned in the text?

• Markets sometimes fail
• Markets are always efficient
• Regulations prevent market failures
• Companies are always transparent
• Free markets guarantee success