Question

One of the roles of a government is to limit the market power of monopolies or even to eliminate them entirely due to:______.

Answer 1

One of the roles of a government is to limit the market power of monopolies or even to eliminate them entirely due to market inefficiencies.

What is market inefficiencies?

An inefficient market, which can happen for a number of reasons, is one where an asset's prices do not fairly reflect their true value, in accordance with economic theory.

Deadweight losses are often the result of inefficiencies. The majority of markets do, in fact, exhibit some degree of inefficiency, and in the worst situation an inefficient market might serve as an illustration of a market failure.

According to the efficient market hypothesis (EMH), in a market that functions effectively, asset prices always reflect the true worth of the asset. For instance, a stock's current market price ought to accurately reflect all information that is now publicly available about it.

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