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7 Cards in this Set
- Front
- Back
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What are the 4 causes of government failure? |
Distortion of price signals Unintended consequences Excessive admin costs Information gaps |
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Explain how a distortion of price signals causes gov failure. |
Subsidies can prevent the price mechanism from doing its job as it can't act freely. |
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When might distortion of price signals be a problem? |
Subsidise and industry which is failing. |
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Explain how unintended consequences cause gov failure. |
Consumers can react in unexpected ways to government policies. A policy could be expensive to implement and so it's hard to achieve original goals. |
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Explain how excessive admin costs cause gov failure. |
Social benefits<financial implementation cost |
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Explain how information gaps cause gov failure. |
Government can't have perfect information when deciding the policies. To have perfect information a cost-benefit analysis is needed (time-consuming + expensive). So assumptions are made. |
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Give an example of how an information gap can cause government failure. |
Housing policies are LR and often fail. |
