Question

lDiscuss limitations of market system and in point wise .

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Answer 1

Answer:

• Public goods won’t be produced at all as producers will have no incentive to provide these goods due to free rider problem.

• Merit goods will be underconsumped due to lack of information, hence, underproduced. Therefore the consumption won’t be up to socially optimum level.

• Demerit goods will be over consumed & hence over produced due to lack of information which may increase social cost.

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