Question

State any two examples, where government policies may lead to failure in

business.​

Answer 1

Government failure occurs when government intervention results in a more inefficient and wasteful allocation of resources. Government failure can occur due to: Poor incentives in public sector. Lack of information.

Answer 2

Market failure is a socially inefficient allocation of resources in a free market. Market failure can occur for various reasons

Externalities

Demerit/merit goods

Public goods

Monopoly power

Government failure occurs when government intervention results in a more inefficient and wasteful allocation of resources. Government failure can occur due to:

Poor incentives in public sector

Lack of information

Bureaucracy and administration costs higher in public sector

Decisions taken for political reasons