Question

Which of the following is correct?

a. Markets are always imperfect, so governments must always interfere to fix them
b. Governments and markets complement each other, with each correcting the problems caused by the other, resulting in efficient outcomes.
c. Governments always suffer from incentives to waste resources, so governments should not be allowed to interfere in the economy.
d. Governments and markets are both imperfect systems, in which people face incentives that sometimes lead to inefficient outcomes.

Answer 1

Answer:

The correct option is b. Governments and markets complement each other, with each correcting the problems caused by the other, resulting in efficient outcomes.

Explanation:

Yes, government and markets complement each other because Government at every level sets the rules and standards and uses its organs to maintain, regulate and control the market forces.Government can set-up Price Regulating Boards to control prices in Unitary System of Government while they allow the Market Forces (Forces of Supply and Demand) to control the supply and demand of goods and services in Free-Market Economies.