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ECON 208 CH16 Market Failures And Government Intervention.pdf

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McGill University
Economics (Arts)
ECON 208
Michel Lapointe

ECON 208 Introduction To Microeconomics Introduction To Microeconomics Chapter 16 Market Failures And Government Intervention Chapter 16 Market Failures And Government Intervention The operative choice is between which mix of markets and government intervention best suits peoples hopes and needsThe basic function of the government is to provide and secure framework of law and order and welldefined and enforced property rightsIdea that institutions are important to ensure that citizens can safely carry on their ordinary economic and social activitiesImportance of institution building challenges in developing countries that stem from their ineffective political structuresThe formal case for free markets is based on the concept of allocative efficiencyAllocatively Efficient Government If all markets were perfectly competitive and if governments allowed prices to be determined by demand and supply then price would equal marginal cost for all productsTotal surplus to society is maximized The informal case i
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