Government intervention can increase total welfare when: a) there are costs or benefits that are external to the market

Marketing Jan 14, 2021

Government intervention can increase total welfare when:

a) there are costs or benefits that are external to the market.

b) consumers do not have perfect information about product quality.

c) a high price makes the product unaffordable for most consumers.

d) all of the above.

e) a and b only.

Expert Solution

Answer choice: e) a and b only.

Explanation:

Government intervention can increase total welfare when there are costs or benefits that are external to the market and consumers do not have perfect information about product quality. Government getting involved can increase happiness if there are costs that are external to the market that the market does not have control over. Also, when consumers do not have the correct information about the product quality then government intervention will increase total consumer happiness by providing additional details and testing.

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