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27 May, 22:24

The interaction of individual choices Because a type of fish is on the verge of extinction, the government imposes rules that prohibit fishing in the publicly owned spawning grounds. At first, owners of fishing boats complain about this restriction on where they can fish, but soon they notice that the number of adult fish swimming outside the protected area is much higher than it was before. With the restriction, each fishing boat ends up catching more fish than it did before the restriction was in place. Which of the following principles of economic interaction best describes this scenario?

A. Markets allocate goods effectively

B. When markets do not achieve efficiency, government intervention can improve overall welfare.

C. Markets usually lead to efficiency.

D. There is a tradeoff between equality and efficiency.

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  1. 27 May, 22:48
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    Answer: Option (B) is correct.

    From the comprehension given, the following is the most suitable description using principles of economics, "When markets do not achieve efficiency, government intervention can improve overall welfare."

    At times it is possible to minimize externalities with government intervention, such as in this particular case government intervention could prevent the extinction of a specific type of fish, which will further lead to lead to an improvement in overall welfare.
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