In a free-market economy, government is needed where _____.

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BlackTom AI · Accepted Answer

To analyze the prompt, we consider why a government might be needed in a free-market economy and what each option implies.
Option 1: 'property rights are not assigned to individuals' If property rights are unclear or not enforceable, markets fail to allocate resources efficiently because individuals cannot safely exchange or invest. Government involvement helps establish and protect property rights, contracts, and rule of law to enable stable exchange.
Option 2: 'the market fails to allocate resources efficiently' This is a classic rationale for government action: markets may experience positive or negative externalities, public goods, information asymmetries, or other frictions that prevent optimal outcomes, so government intervention can improve welfare by correcting these failures.
Option 3: 'a single supplier has a substantial influence on the market price' When a monopolist or dominant firm exerts control, prices and output can deviate from competitive levels, reducing welfare. Government appears to be warranted to regulate or oversee such market power to promote competition and protect consumers.
Option 4: 'all of the above apply' Since each of the preceding options identifies a scenario in which government intervention could be warranted in a free-market context, the combined claim that all apply is coherent and comprehensive.
In summary, each individual option presents a separate reason for government involvement, and together they cover the broad justification often cited in economics for government role in markets.

Microeconomics POSTTEST Microeconomics POSTTEST

In a free-market economy, government is needed where _____.

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