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Economics

The Efficiency of a Competitive Market

*? When an competitive markets generate an inefficient allocation of the resources or market failure?

1) Externalities

Costs or benefits which do not show up as part of the market price (for example pollution)

2) Lack of Information

Imperfect information prevents the consumers from making utility maximizing decisions.

*? Government intervention in these markets increase efficiency.

*? Government intervention without market failure creates inefficiency or the deadweight loss.

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M9511162

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