Author Question: Which of the following is NOT an alleged unrealistic assumption that proponents of behavioral ... (Read 56 times)

tth · **on:** Jun 29, 2018

Which of the following is NOT an alleged unrealistic assumption that proponents of behavioral economics suggest are commonly utilized in traditional economic models based on the rationality assumption?

A) unbounded selfishness
B) unbounded rationality
C) unbounded will power
D) unbounded resources

Question 2

What is market failure? How can the government correct market failure?

What will be an ideal response?

BUTTHOL369 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

D

Answer to Question 2

Market failure is a situation in which the market economy leads to too few or too many resources going to a specific economic activity as a result of externalities. External costs lead to too much supply in a market than otherwise. In this case, the government can correct the market outcome by imposing a tax and regulation. On the contrary, external benefits lead to too little market demand than otherwise. In this case, the government can correct the market outcome with subsidies and regulation.