Multiple Choice
Which of the following best describes how decisions are made under certainty in microeconomics?
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0. Basic Principles of Economics
Positive and Normative Analysis
Multiple Choice
Which of the following is a result of regulation in a mixed-market economy?
A
Government intervention can correct market failures such as externalities.
B
Prices are always determined solely by supply and demand without any government influence.
C
Regulation eliminates the need for any government involvement in the economy.
D
All goods and services are provided exclusively by private firms.
Verified step by step guidance1
Understand the concept of a mixed-market economy, which combines elements of both free markets and government intervention.
Recognize that in a purely free market, prices are determined solely by supply and demand without government influence, but this is not the case in a mixed-market economy.
Identify that government intervention, such as regulation, is often used to address market failures, including externalities (costs or benefits not reflected in market prices).
Note that regulation does not eliminate government involvement; rather, it is a form of government involvement aimed at improving market outcomes.
Conclude that in a mixed-market economy, government intervention can correct market failures such as externalities, which is why this is the correct result of regulation.
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