Government failure occurs when the benefits of regulation are:

• A. greater than the costs imposed by the regulation
• B. equal to the costs imposed by the regulation
• C. unrelated to the costs imposed by the regulation
• D. less than the costs imposed by the regulation

Answer: (D)

Verified step by step guidance

1. Understand the concept of government failure: it occurs when government intervention in the market leads to a net loss in economic efficiency.
2. Recall that regulation is intended to correct market failures by imposing costs and generating benefits.
3. Identify that government failure happens when the costs of regulation exceed the benefits it provides, meaning the regulation causes more harm than good.
4. Compare the benefits and costs of regulation: if benefits < costs, then government failure has occurred.
5. Conclude that the correct condition for government failure is when the benefits of regulation are less than the costs imposed by the regulation.