Reasons for government intervention in markets：練習題

What is a fundamental economic reason for a government to provide street lighting directly to its citizens?

In an effort to make essential housing more affordable, a government imposes a maximum price set below the market equilibrium.
What is a certain consequence of this intervention, assuming no other changes in the market?

A government provides national defense and also subsidises the consumption of fruit and vegetables. Which statement correctly identifies the economic reasons for these two interventions?

What is a common reason for a government to intervene in the market for merit goods, such as primary education?

How does the concept of imperfect information justify government intervention in the market for demerit goods?

State why a government might provide information to consumers regarding the nutritional benefits of consuming fresh vegetables.

Explain how imperfect information leads to the over-consumption of demerit goods and why this necessitates government intervention.

Using the concepts of non-excludability and non-rivalry, explain why the free-rider problem prevents the private sector from reaching the socially optimal output where \( \text{MSB} = \text{MSC} \), and analyze why this specific failure necessitates direct government provision.

(a) Explain the distinction between a maximum price (price ceiling) and a minimum price (price floor).
(b) Identify two specific economic reasons why a government might decide to intervene in the market for staple foods by setting a maximum price during a period of rapidly rising prices.

Consider a market for rental housing where the equilibrium rent is determined by demand and supply. The government introduces a rent ceiling (maximum price), denoted as \( P_{max} \), below the current market equilibrium to make housing more affordable.
(a) With the aid of a demand and supply diagram, explain how this intervention leads to a persistent shortage in the housing market.
(b) Analyse two possible methods the government could use to address the resulting shortage in the long run.