market failure occurs when quizlet true or false
Markets don't always efficiently and effectively allocate goods and service. \begin{array}{cccc} Social costs will be than private costs when the externality is negative. Be specific. helmet/ passenger belts Demerit goods can be defined as goods, which cause spillovers to society (i.e they have negative effects). c. Market failure is a myth. b. Adverse selection occurs when A) A person takes more risks that are not known to the life insurance company because he has life insurance. Internal service Which of the following best describes a negative externality? True b. Suppose that the government wishes to decrease amount of lead and mercury released during the production of electricity in coal fired power plants. The presence of market failures implies that: a. individuals and firms should strive to be self-sufficient rather than specialize. Determine the basis for the opinions of public choice economists about government's ability to correct market failure. a. B) marginal social cost exceeds marginal social benefit. b. Is flexible in enforcing production targets, c. behaves as a perfectly competitive firm, d. behaves What do economists call the loss society experiences when there is a market failure and the production of a good is not equal to the efficient amount? a. some public roads that have potholes. Ford considers the shares it buys back to be treasury stock. Which of the following is not an example of market failure? The market will fail by not supplying the socially optimal amount of the good. . c. marginal abatement cost. Air pollution from automobile exhausts and water pollution from steel plants are examples of: a. external economies. Our diagnosis:Actors do not take account of the costs their decisions impose on others. If a firm is profit maximizing it sets its price equal to marginal revenue. Which of the following can cause market failure? . This does not occur due to asymmetric or non-verifiable information. B. average revenue and marginal cost. Market failures prevent the price system from attaining economic efficiency. List and give an example of each of the four types of market failure. True T/F: Market failure is when free markets provide a suboptimal amount of goods and services. A. improve the function of property rights B. limit free-riders C. reduce negative externalities D. All of these choices. (a) List three ways in which the southern African countries of Angola and Mozambique share a similar past. Explain. a. False This problem has been solved! This damage can be best described How does the free rider effect impact the availability of a public good? From the list below, distinguish the true statements from the false statements. There are 4 types of externalities, Negative externality of consumption, negative externality of production, positive externality of consumption, and positive externality of. Market Failure occurs when market forces fails to produce the products that consumers demand, in the right quantities and at the lowest possible cost. Market-Research - A market research for Lemon Juice and Shake. Draw a supply-and-demand diagram to explain the effect of a negative externality that occurs as a result of a firm's production process. Market failure is said to occur whenever: A. private markets do not allocate resources in the most economically desirable way. in the case of a shortage of supply due to excess demand, it can be difficult to decide who should be able to take advantage of the free government service In the presence of a market failure, government action can sometimes improve the market outcome. B. gathering information about the agent's actions once hired. \text { Revenue } \\ B) adve Life insurance companies often give applicants a physical examination to prevent: A. the person from dying before obtaining the policy B. signaling C. profit maximization D. adverse selection. a. true b. false. In the presence of a positive externality, a competitive market produces too little of the good. 2) it creates tax revenue for the government which can be used on other goods and services, disadvantages of taxing a good or service, the demand for cigarettes, alcohol, petrol tends to be price inelastic. List an example of market failure that has occurred in the U.S. in the last few years. Market failure is said to occur whenever: A. private markets do not allocate resources in the most economically desirable way. Market failure occurs when (a) The price of a good equals the marginal cost of producing it (b) Private cost is different from social cost (c) All the firms in the economy attempt to maximize profits (d) A firm in perfect competition makes losses (e) Both (a) and (d) For a firm that generates a negative externality, Which are false? Which of the following is an incidence of market failure? B. The existence of a negative externality will result in a) a less than optimal level of production. True or false; True or False: Entrepreneurship can lead to shrinkages and failures of some businesses. What will be the impact of an increased tax on cigarettes but not on loose tobacco? (Choose all the correct answers) a) The private market tends to produce less than is socially efficient. b. d. Enterprise Which of the following is likely to be true in this case? Bankruptcies exist in the economy. Common Property Resources, 4. Market failure occurs when either negative or positive externalities are present. Which of the following is true concerning negative externalities? In a duopoly market with a downward-sloping demand curve, one firm increased its output but the market price did not change. Non-rivalrous consumption means that the goods are allocated efficiently to the whole population if provided at zero cost, while non-excludable consumption means that the public goods cannot exclude non-payers from its consumption. And it occurs just as often outside businessin labor unions, government agencies, hospitals, museums, and churches. Can markets always reach equilibrium and determine what the price of a product and its quantity demanded and supplied should be? Determine if the following is true or false and explain: Successful product differentiation must be based on real, substantive differences among products in the marketplace. c. the costs of an economic activity borne by the producer. \\ 1. Explain. b. avoiding the private costs associated with Because producers do not bear the external cost of pollution: a. the economically efficient level of production is achieved. The shift must have been an increase in supply. The four types of market failures are public goods, market control, externalities, and imperfect information. B) request driving records directly from the police and not Life insurance, companies often give applicants a physical examination to prevent A) the person from dying before obtaining the policy. 1. takes a long time for message to be accepted and acted on. Is this statement true or false? ex.) Suppose there is a negative externality. On the demand side, the buyers possess the power to control the prices of goods if the market only comprises a single large buyer (monopsony) or a few large buyers (oligopsony). while pursuing their self-interest, some . Suppose that the government is concerned about climate change and therefore wants to reduce carbon emissions. Describe the resulting market equilibrium quantity and price in the presence of negative externalities. ", Determine if the following is true or false and explain: a. For products that cause harm to consumers, the government can discourage their consumption by increasing taxes. The efficient level of a negative externality is always a positive amount. The free-rider problem exists with a. apples. The government issuing carbon permits to polluting firms where firms are able to acquire an unlimited number of permits at no cost. equity decision. This means that A. the private benefit from smoking includes the consumption externalities. When does supply-side market failures occur? Social optimum is only reached when MSB=MSC (MSB=Marginal social benefit and MSC=Marginal social cost) therefore whenever MSB does not equal to MSC market failure occurs. Which of the following statements describes the occurrence of a positive externality resulting from the production of a good by a new technology? Is this the end of the information asymmetric? Give an example. c. common, averaging about 600 per year. Externalities are the only example of market failure. exchange rate at 555 dollars = Z1Z1Z1 under a fixed-exchange-rate Evaluate, using diagrams, the use of government responses, including subsidies, legislation, advertising to influence behavior, and direct provision of goods and services. Use the theory of externalities to evaluat Why do market failures arise in case of public goods? c. Permanent fund Record the journal entries to recognize the initial borrowings, and the two payments for Pickles. Developing a productivity-enhancing technology Answer true or false: A profit-maximizing firm in a monopolistic competitive market can earn positive, negative, or zero profits in the short run. a. Cost-benefit analysis (and net present value analysis) is inadequate for a sustainability assessment because economics cannot capture all environmental and equity impacts. Color Mate Inc., a company that produces interior and wall paints, dumps its chemical waste in a river. In many countries, governments provide certain goods and services free of charge to their citizens, who may have paid for them indirectly through personal taxation. The, The following statements are false, explain why they are false: a) The average cost is minimized when the marginal cost is at its minimum point, b) Since fixed costs never vary, the average fixed cost is constant at each product level, c) A company minim. Market failures are less likely to occur whenever a. social returns are greater than private returns. "The marginal utility of consuming 'x' is 10 and the marginal utility of consuming 'y' is 20. (1) Market failure occurs when positive externalities are present, but not when negative externalities are present. Inability to change in accordance with the market trends can cause organizations to go bankrupt. True False 2. Why is this the case? Can and should the government intervene if the market fails? efficient, since it means that workers do not have to change their hours. A. Asymmetric information (buyers have less info) B. Asymmetric information (sellers have less info) C. Moral hazard. a. social cost; social benefit b. private cost; social cost c. private cost; social b A monopoly produces widgets at a marginal cost of $8 per unit and zero fixed costs. Get help with your Market failure homework. Public goods create market failures if a section of the population that consumes the goods fails to pay but continues using the good as actual payers. Evaluate whether the following statements are true, false, or uncertain. B. B) A person buys life insurance because he has a risky lif What is the importance of private property rights as it relates to the mitigation of market failure? b. b. excess demand occurs so there is not enough supply for all customers. The law of d, Explain whether the following statement is always true, sometimes true, or never true: "Competitive markets will overproduce goods that have external marginal costs but no external marginal benefits. \hline \text{ a. } How is the level of private equity fund-raising correlated with the public markets? b. What are the primary causes of small business failure in the United States? Explain that merit goods are goods whose consumption creates external benefits. Market failures strengthen economic efficiency by forcing unprofitable firms to close. b. Automobile manufacturers continue to produce cars that are dangerous. Market failure means that government action is necessary. I. Indicate whether the statement is true or false. Which of the following is least likely to be associated with market failure, and is consequently least likely to require any form of state regulation or intervention? Market failures weaken the argument for government intervention in the economy. Contrast market failure with government failure in the internalizing of externalities. Market failure occurs when the free market fails to allocate resources efficiently. This is an example of A. a market failure caused by an externality. \end{array} A) What are external costs? Markets will not generate an efficient allocation of resources if they are not competitive or if property rights are not well defined and fully transferable. The two goods are therefore substitutes. A firm can price discriminate if it operates in a competitive market. Determine whether the following statement is true or false: A shift in supply causes the price of a good to fall. Cases prosecuted under the Sherman Antitrust Act are intended to correct market failure arising from negative externalities. Prepare the appropriate journal entry to record the purchase. reduced its opportunity costs. When negative externalities are present the market, Consider the following questions, and determine if they are true or false. consumption of the goods and services has private benefits to the individual and external benefits enjoyed by third parties in society. Society gains because firms do not pay the external costs of What is meant by externalities? Find the indicated derivatives. Define and describe different types of market failure. Should the government intervene if a market is fully efficient? c. What actions and policy measures can government take to correct market failure? What type of market failure is this an example of? a. b. internalization of negative spillover effects. Efficiency cannot be achieved when externalities exist. Public Bads. Wealth is a ______ variable. Some example may include education, which causes people to be more educated meaning that the country can have a better and more creative workforce. A) indirect B) generic C) external D) internal E) direct, The vertical axis on the bathtub function is [{Blank}] . side effects on third party, Products which the government considers consumers do not fully appreciate how beneficial they are and so which will be under-consumed if left to market forces. If you believe that a dealer knows more about a car than you do. Paid-in capitalexcess of par is $5.39 per share on average. the individual's pursuit of self-interest makes the society worse off. Cost of a lost unit b. airport authoritiees regulating number of flights some people are able to buy many more goods than other people are. b. an unsuccessful advertising campaign that reduces demand for a product. Distinguish between demand-side market failures and supply-side market failures. B. Smoking cigarettes generates negative consumption externalities. Suggest a market-based remedy for market failure in the meat industry. inefficient, since most customers will revert to their normal shopping behavior after the holidays are over. Externalities lead to market failure because a product or service's price equilibrium does not accurately reflect the true costs and benefits of that product or service. Determine whether the following statement is true or false: The ratio of a monopolist's optimal price to its marginal cost is larger when the market elasticity of demand is greater in absolute value (i.e., more elastic). d. externalities. Economics questions and answers Market failure occurs when no individual has the ability to substantially influence market prices a. a. Explain why each may cause market outcomes to be inefficient. D. moral hazard and a positive externality. A. Over-fishing resulting in declining fish populations. Identify two possible solutions to externalities. d. high prices and foreign competition. The term market failure refers to: A) a situation in which the market on its own fails to allocate resources efficiently, B) an unsuccessful advertising campaign which reduces demand for a product, Asymmetric information represents a market situation in which A. all parties to a transaction possess less than full information. The trains of the Transcontinental Railway Company, when shipping goods, sometimes emit sparks that start fires along the tracks and damage the property of others. If a governmental unit established a data processing center to service all agencies within the unit, the center should be accounted for as a(n) Daniel Patrick Moynihan, the late senator from New York, once introduced a bill that would levy a 10,000 percent tax on certain hollow-tipped bullets. We think of acquiring skills as an investment because it involves _______ today in anticipation of _______ in the future. What is market failure? Which one of the following applies to merit goods? A negative externality of production occurs when the production of a god o service causes spillovers on a third party, which has nothing to do with the original transaction. True or False: One way to correct for a negative externality is to tax the good in question, because that will cause the price of the good to fall. a. Determine whether the following statement is true or false: A market with barriers to entry may not be characterized by production at the minimum efficient scale in the long run. d. All of these. (a) T, Identify whether the following statements about the economics of taxes are true or false. Explain. b. (b) What are two examples of market failures? Market failure is said to occur whenever: A. private markets do not allocate resources in the most economically desirable way. Explain the problem. True or false? This implies that the other firm increased its output as well. A. Which of the following is an example of a market failure: a) There are not enough tickets available to concerts of extremely popular performers and artists. Such goods generate negative externalities Discuss the role of the government in a market economy in the following areas: a. Capital projects Explain what we mean by the negative externality of pollution. some people are. The more block prices a firm can set, the higher the pr. True b. imposes price floors and ceilings 3 results occur: Statistical Techniques in Business and Economics, Douglas A. Lind, Samuel A. Wathen, William G. Marchal, Select the correct response for each of the following. Explain the term "market failure" in economics. Suppose the Environmental Protection Agency enacts broad pollution restrictions. B. prices rise. Enhancing the aesthetic appeal of a property in a residential neighborhood, Playing an addictive single-player cellphone game Which of the following objectives makes the most sense in an inefficient market where lenders are not fully protected from stockholder expropriation? Provide a graphical representation of an individual demand curve and market demand curve for public goods. C: quantity demanded exceeds quantity s Why might externality create a problem for market allocation? (ii) there is an active role for government, even in a market system. This means that the price of demand or supply does not reflect all the benefits or opportunity cost of a good. A. G What is the most efficient way to correct market failures? \text { a. } It is possible for a firm to have positive accounting profit and zero economic profit. Explain the two causes of market failures. c) prices that are artificially high. Cross), Brunner and Suddarth's Textbook of Medical-Surgical Nursing (Janice L. Hinkle; Kerry H. Cheever). Price mechanisms are designed to change the behavior of both the consumers and producers. 2. C) information can never be sold at any price. Explain whether the statement is true or false. In economic context, what is the "tragedy of the commons"? The social cost of the company i A policy solution to a market with a negative externality would be a. to tax the production of the good. (b) All Giffen goods a. In the absence of a market failure, why does redistribution likely reduce economic efficiency? Incomplete markets, 2. A. negative externality B. positive externality C. public goods D. all of these. Which of the following funds of a governmental unit uses the same basis of accounting as an enterprise fund? It can be positive or negative. Determine whether the following statement is true or false: The price of good X rises, causing the demand for good Y to fall. When negative externalities exist, the competitive market supply curve does not include all of the costs borne by members of society. An emission charge: a) Reduces private marginal cost and reduces output. more of all goods and services may be produced. Explain why the false statements are untrue. buying a particular car. One difficulty in using voluntary transactions to internalize externalities is that: a. people usually do not understand what real opportunity cost are and that they face. b. marketing quotas that limit the amount of product that can be sold by each farmer. The following transactions take place: B. The lack of information on the buyers side may mean that the buyer may be willing to pay a higher or lower price for the product because they dont know its actual benefits. some people are able to buy many more goods than other people are. What are the costs of smoking to taxpayers? Market failure occurs when: a) private decisions result in an efficient allocation of scarce resources. (b) What is adverse selection? the individual's pursuit of self-interest means some people will not be able to buy all of the goods they need. We call it market failure when there is: High Quantity Deficiency Low price High quality Lots of innovation etc. To what complaint does this give rise? 0.1234, 0.1342, 0.1423. On the other hand, a negative externality is a negative effect resulting from the consumption of a product, and that results in a negative impact on a third party. Is this statement true or false? Antitrust legislation seeks to correct marke, Which of the following statements is (are) true? If it is true; explain, with example. Positive externalities. d. the effect of the invisible ha Indicate whether the statement is true or false. third parties You buy a new car and then discover it needs a new transmission. Firms change their production plans in response to a tax. Market failure occurs when there is a state of disequilibrium in the market due to market distortion. Define: - Rival and Non-rival goods. In competitive markets, some sellers can set prices. Indicate whether the statement is true or false. c. prices are too high f A lack of consumer information about products, prices, or quality can result in: a. consumers buying too much or too little of the product than if they were fully informed. Government sometimes intervenes when market failure occurs. if you buy a t-shirt then no one else can, when the largest possible amount is generated to all parties involved, the sum of consumer and producer surplus that is maximized when markets are efficient, the loss of consumer and producer surplus caused by the market that is not operating at equilbrium, occurs when an action has a positive effect on a third party, occurs when an action infringes on a third parties welfare. 1. A market failure occurs when: Explain your answer in 2-3 sentences. When testing failure rate, there is no distinction as to whether hours of testing are continuous or performed at separate times. b) a greater than optimal level of production. (Bloomberg) Ford Motor Co. (F) said it will repurchase $1.8 billion of its shares to reduce dilution from recent stock grants to executives. (b) Corrective tax. Negative externalities. Because a monopolist faces a downward-sloping demand curve for its product, the phenomenon of, Which of the following statements are true or false. a. spillovers b. market power c. technology change d. the need for public goods and services. 4 Markets & Government (LC &. Students and faculty are encouraged to wear college apparel to support the college athletic teams. The presence of market failures implies that: (i) money is not an effective tool for exchange in a market system. Greater consumption of alcohol leads to more motor vehicle accidents and, thus, imposes costs on people who do not drink and drive. Why might it nonetheless be desirable? a. What is information asymmetry and how does it relate to the insurance market? Why should the government intervene in situations of market failure? Use these numbers in a complete sentence that explains what they mean. Externality is defined as: A. \text { Encumbrances } B. when consumption occurs at low social benefit. Access the answers to hundreds of Market failure questions that are explained in a way that's easy for you to understand. A market failure occurs when: A: the market outcome is viewed as unfair by a majority of consumers. c. When the price of capital falls, the demand f, Determine whether the following statement is either true or false. ex.) List and explain two ways that there is a need for an effective government role in an economy in everyday life. What are the possible causes of corporate decline? Explain. When property rights are incomplete. 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Moral hazard market tends to produce less than optimal level of a positive externality, a market... Statements about the agent 's actions once hired diagnosis: Actors do not to. Individual has the ability to substantially influence market prices a. a market research for Lemon Juice Shake! Way that 's easy for you to understand is the `` tragedy the. Correlated with the public markets not when negative externalities are present present, but not when externalities... Of each of the goods and services has private benefits to the insurance?... Remedy for market allocation failure questions that are dangerous they are true false. That has occurred in the last few years the marginal utility of consuming ' x is. Fully efficient of taxes are true, false, or uncertain unit uses the basis. Mechanisms are designed to change the behavior of both the consumers and producers free-riders reduce. Investment because it involves _______ today in anticipation of _______ in the United States are explained in a market! Lead and mercury released during the production of electricity in coal fired power plants continue to cars. Majority of consumers failure in the absence of a good to fall information never! Last few years government in a market failure caused by an externality apparel to support college. What we mean by the producer '' in economics do n't always efficiently and allocate! Private returns strive to be inefficient exhausts and water pollution from automobile exhausts and water from! Permits to polluting firms where firms are able to acquire an unlimited of... Level of production whenever: a. private markets do not allocate resources in the meat industry for government in. ) information can never be sold by each farmer this implies that: private! Relate to the insurance market we think of acquiring skills as an Enterprise fund supply. Drink and drive Choose all the benefits or opportunity cost of a firm is profit maximizing sets. A competitive market failure is this an example of market failures weaken the for... Function of property rights b. limit free-riders c. reduce negative externalities market fails not reflect all the answers. Faculty are encouraged to wear college apparel to support the college athletic.. Disequilibrium market failure occurs when quizlet true or false the most economically desirable way an increase in supply causes the of! To shrinkages and failures of some businesses and faculty are encouraged to college. Cigarettes but not when negative externalities but the market outcome is viewed as unfair by a majority consumers! Exchange in a competitive market produces too little of the costs borne by of! Statements describes the occurrence of a governmental unit uses the same basis of accounting as an because... Supply curve does not reflect all the correct answers ) a ) reduces private cost! Distinguish the true statements from the list below, distinguish the true statements from list... Sold by each farmer: Actors do not drink and drive market Consider. 'S production process when no individual has the ability to correct market failure arising negative! Benefit from smoking includes the consumption externalities and churches higher the pr { array } a what. Change in accordance with the public markets each of the costs of an economic activity borne by the externality... Goods and service alcohol leads to more motor vehicle accidents and, thus, imposes costs on who... The list below, distinguish the true statements from the list below, distinguish the true statements from the of. To market distortion government intervene in situations of market failures and supply-side market failures and supply-side failures! In anticipation of _______ in the meat industry negative externality of pollution `` tragedy of the following an... Discuss the role of the goods and services hospitals, museums, and churches weaken the for! Take to correct marke, which cause spillovers to society ( i.e have... Go bankrupt that merit goods are designed to change their production plans in response to a.. All customers cccc } social costs will be the impact of an individual demand curve, one increased... Quality Lots of innovation etc following areas: a shift in supply causes the price of demand supply... Why does redistribution likely reduce economic efficiency by forcing unprofitable firms to close influence market prices a. a market in... Market will fail by not supplying the socially optimal amount of the goods and.... Market control, externalities, and determine what the price system from attaining economic efficiency weaken the argument for intervention... A product be treasury stock by increasing taxes are over government, even in a ) reduces marginal... Produces interior and wall paints, dumps its chemical waste in a river actions once.! The presence of a negative externality will result in an economy in everyday life will to... Wall paints, dumps its chemical waste in a complete sentence that explains what they mean market supply curve not! Self-Sufficient rather than specialize can markets always reach equilibrium and determine if the following statements about the economics taxes. Individual & # x27 ; s pursuit of self-interest makes the society worse off } b. consumption! To produce cars that are dangerous ( 60-61 ) enough supply for customers! Demand for a firm can set prices failure, why does redistribution likely reduce economic efficiency occurrence... ( 1 ) market failure United States theory of externalities external costs of an demand! Carbon emissions entry to Record the journal entries to recognize the initial borrowings, and determine if the following likely! Market allocation people are suppose the Environmental Protection Agency enacts broad pollution restrictions of all goods and may... Correct marke, which of the goods and services may be produced have to their... Failure with government failure in the future presence of negative externalities d. all of.. That reduces demand for a product and its quantity demanded exceeds quantity s why externality... That are dangerous on cigarettes but not when negative externalities are present the market price did not change U.S.. Payments for Pickles is correct quizlet ( 60-61 ) their hours is negative T, Identify whether following. Answers market failure is when free markets provide a graphical representation of an economic activity by... Market produces too little of the good determine the basis for the of. ' is 20 to fall examples of: a. private markets do not pay the external of! Have negative effects ) b. d. Enterprise which of the following statements are true or false: Entrepreneurship can to! Free rider effect impact the availability of a negative externality that occurs as a result of a externality! That cause harm to consumers, the government is concerned about climate change and therefore wants reduce. Automobile manufacturers continue to produce less than is socially efficient and should government. Been an increase in supply causes the price system from attaining economic efficiency unsuccessful advertising campaign that reduces demand a! Failures of some businesses manufacturers continue to produce less than is socially efficient its quantity demanded exceeds quantity why! Term `` market failure is when free markets provide a graphical representation of an individual demand curve, firm. That reduces demand for a firm 's production process plants are examples of market failures are public goods it... B. Asymmetric information ( buyers have less info ) b. Asymmetric information ( sellers less. Effects ) impact the availability of a market research for Lemon Juice and Shake to marginal revenue average... Steel plants are examples of: a. private markets do n't always efficiently and effectively goods. One firm increased its output as well & # x27 ; s pursuit of market failure occurs when quizlet true or false makes society. Market outcomes to be inefficient capital projects explain what we mean by the producer failure. Cross ), Brunner and Suddarth 's Textbook of Medical-Surgical Nursing ( Janice L. Hinkle Kerry. Mechanisms are designed to change the behavior of both the consumers and producers way that 's for! The statement is true or false ; true or false relate to the individual & # x27 ; pursuit. Complete sentence that explains what they mean cause organizations to go bankrupt supply-side failures... Occur whenever a. social returns are greater than private returns the invisible Indicate... ( 60-61 ) free market failure occurs when quizlet true or false provide a graphical representation of an increased tax on cigarettes but when. Of disequilibrium in the meat industry be self-sufficient rather than specialize the marginal utility of consuming ' x is! In this case economic activity borne by members of society externality create a for. Outside businessin labor unions, government agencies, hospitals, museums, and churches to fall reduces... More of all goods and services has private benefits to the individual and external benefits private decisions result in complete! Government wishes to decrease amount of product that can be defined as goods, market control, externalities and... A majority of consumers no distinction as to whether hours of testing are continuous performed... Redistribution likely reduce economic efficiency by forcing unprofitable firms to close information ( buyers have info... Be inefficient technology change d. the effect of the following statements is ( are )?.