Question

Immediately after an ice storm brought down power lines throughout the region, hardware stores were sold out of batteries and flashlights. However, within a couple of days, special deliveries brought in extra batteries and flashlights, and everyone who wanted to buy a flashlight or batteries was able to do so. Which of the following principles of economic interaction best describes this scenario?

1. When markets do not achieve efficiency, government intervention can improve overall welfare.
2. All costs are opportunity costs.
3. There are gains from trade.
4. Markets allocate goods effectively.

Answer 1

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

Step-by-step explanation:

The caveat here however, is that the intervention in humanitarian situations such as this do not always come from government.