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Exam 1000 words From the late 1970s to the early 2000s, UK governments favoured

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Exam
1000 words
From the late 1970s to the early 2000s, UK governments favoured a policy of using free and unhindered markets to achieve an efficient and equitable society.
a) Using a General Equilibrium framework, show how it is theoretically possible for competitive markets to achieve an efficient and fair economy.
(70 marks)
In reality, many free and unhindered markets will not achieve efficient and fair outcomes due to market failures.
b) Using the “Theory of Second Best”, explain how governments could take measures to mitigate the effects of these market failures. Support your arguments with an example.
(30 marks)

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