How does government regulation affect market efficiency?
A)Regulations only increase the efficiency of how markets function.
B)Regulations are a substitute for market efficiency.
C)Some regulations correct for market failure; other regulations cause inefficient outcomes.
D)Regulations only move markets further from efficiency.

Question

Quizplus · Accepted Answer

Some regulations, such as those that correct for market failure (e.g. anti-trust regulations), can lead to more efficient outcomes. However, other regulations may cause inefficient outcomes by introducing barriers to entry or reducing competition, ultimately resulting in decreased market efficiency.

How Does Government Regulation Affect Market Efficiency