State whether each of the statements is TRUE or FALSE, and with one or more sentences and (if needed) a graph explains your reasoning as clearly as you can. a) Command-and-control approach always leads to inefficiency. b) The existence of property right will solve the externality problem associated with public good. c) Market failure arises from public good will be solved if consumers revealed their willingness to pay.

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Market Failure Analysis

To understand Market failure, we need to first understand welfare economics. An Italian economist, Vilfredo Pareto stated that allocation of resources in an efficient manner such that an economic change, which harms no one and makes someone better off, indicates an increase in social welfare. It is also called Pareto Optimality, where resources cannot further be reallocated without harming one. This does not apply to those economic changes, which harm some and benefit others. social welfare increases if the utility of any of its members' increases and none decrease in the economy.