The role of Government coerce in maximizing economic efficiency.
Explanation of Solution
When the government is allowed to coerce in the economy during some situations, it will help the economy to maximize the economic efficiency. The market system has the inherent problem for market failure. The market failure can be handled by the introduction of the public goods which will enforce the positive externalities.
The government can easily identify the unethical practices in the economy such as fraud and extortion etc. when the government is invested with the right to coerce; it can correct the unethical practices. It will help to reduce the risks associated with markets. Thus, investing the government with the right to coerce in the economy will help to maximize the economic efficiency.
Concept introduction:
Economic efficiency: The economic efficiency is a situation in which all the economic resources are being efficiently utilized and the resource wastage is minimized.
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