For private goods, competitive markets ensure efficiency despite the decentralized nature of the information about individual’s tastes and firm technologies. Implicitly, market competition solved adverse selection problems and the fixed-price contracts associated with exogenous prices solve moral hazard problems. However, markets fail for pure public goods and public intervention is thus needed. In this case, the mechanisms used for those collective decisions must solve the incentive problem of acquiring the private information that agents have about their references for public goods. Voting mechanisms are particular incentive mechanisms without any monetary transfers for which the same question of strategic voting, i.e., not voting according to the true preferences, can be raised. For private goods, increasing returns to scale create a situation of natural monopoly far away from the world of competitive markets. When the monopoly has private information about its cost or demand, its regulation by a regulatory commission becomes a principal-agent problem.
Note: Public goods are those in which individuals cannot be excluded from use and where use by one individual does not reduce availability to others, while an individual can be excluded in case of private goods.
For which of the following goods, can markets not be efficient?
Show Hint
- Packaged water
- Electricity supply at home
- Air
- Petrol
- All of the above
The Correct Option is C
Solution and Explanation
Packaged water is excludable and rivalrous, so it can be efficiently allocated through markets.
Electricity supply at home can be priced and supplied efficiently by regulated markets.
Petrol is also sold through markets and is both excludable and rivalrous.
Air, however, is a public good. It is non-excludable (nobody can be prevented from breathing it) and non-rivalrous (one person’s use does not diminish another’s). Because of this, markets cannot allocate it efficiently — leading to issues like pollution (negative externality). Thus, the correct answer is: \[ \boxed{\text{Air}} \]
Which of the following cannot be concluded from the above paragraph?
Show Hint
- Public intervention is the panacea when market fails.
- Adverse selection problems as well as moral hazard problems may not arise in competitive markets.
- Strategic voting is nothing but a non-monetary incentive mechanism.
- Lack of access to private information regarding preferences of agent leads to incentive problem.
- Public regulations may address problems associated with natural monopoly.
The Correct Option is A
Solution and Explanation
- Other options, such as (B), (C), (D), and (E), all align with possible inferences or common discussions related to market and economic problems.
\[ \boxed{\text{Option A is not concluded.}} \]
Read the following statements carefully:
Statement 1: In India factories dump their waste in the nearby water bodies.
Statement 2: Government is thinking of granting tax benefits to factories which adopt eco–friendly practices.
Which of the following options best captures the relationships between Statement 1 and Statement 2?
Statement 1: In India factories dump their waste in the nearby water bodies.
Statement 2: Government is thinking of granting tax benefits to factories which adopt eco–friendly practices.
Which of the following options best captures the relationships between Statement 1 and Statement 2?
Show Hint
- Statement 1 is an example of market failure and Statement 2 corroborates Statement 1.
- Statement 1 is an example of ‘adverse selection problem’ and Statement 2 is an example of ‘moral hazard problem’.
- Statement 1 is an example of market failure while Statement 2 suggests one way of reducing the problem.
- Statement 1 is an example of public good and Statement 2 is an example of private good.
- In Statement 1 the principal is ‘factory’ and in Statement 2 the principal is ‘government’.
The Correct Option is C
Solution and Explanation
Statement 2: The government proposes tax benefits for eco-friendly practices, which is an intervention designed to internalize externalities and reduce the problem of pollution.
- Option A: Incorrect — Statement 2 does not corroborate Statement 1; rather, it suggests a solution.
- Option B: Incorrect — adverse selection and moral hazard do not apply here.
- Option C: Correct — this precisely captures the relationship.
- Option D: Incorrect — this is not about public vs. private goods.
- Option E: Incorrect — principal-agent terminology does not apply here.
\[ \boxed{\text{Statement 1 shows market failure, Statement 2 suggests a corrective measure.}} \]
Top Questions on Reading Comprehension
Trade is essentially the buying and selling of items produced elsewhere. All the services in retail and wholesale trading or commerce are specifically intended for profit. The towns and cities where all these works take place are known as trading centres. The rise of trading from barter at the local level to money-exchange on an international scale has produced many centres and institutions, such as trading centres or collection and distribution points.
Trading centres may be divided into rural and urban marketing centres. Rural marketing centres cater to nearby settlements. These are quasi-urban centres. They serve as trading centres of the most rudimentary type. Here, personal and professional services are not well-developed. These form local collecting and distributing centres. Most of these have mandis (wholesale markets) and also retailing areas. They are not urban centres per se but are significant centres for making available goods and services which are most frequently demanded by rural folk.
Periodic markets in rural areas are found where there are no regular markets and local periodic markets are organised at different temporal intervals. These may be weekly, bi-weekly markets where people from the surrounding areas meet their temporally accumulated demand. These markets are held on specified dates and move from one place to another. The shopkeepers, thus, remain busy all day while a large area is served by them.
Urban marketing centres have more widely specialised urban services. They provide ordinary goods and services as well as many of the specialised goods and services required by people. Ur- ban centres, therefore, offer manufactured goods as well as many specialised developed markets, e.g. markets for labour, housing, semi-or finished products. Services of educational institutions and professionals such as teachers, lawyers, consultants, physicians, dentists and veterinary doctors are available.- CUET (UG) - 2025
- Geography
- Reading Comprehension
- India even now possesses a wealth of manuscripts running into many millions. Tradi- tionally, they were written on materials such as birch bark (bh¯urja pattra) and palm leaves. Birch bark was mainly used for north Indian scripts, and the writing was done with ink made of finely ground charcoal powder in a medium of gum, or soot from oil lamps. With palm leaves, there was no ink; rather, a sharp point was used to tear the leaf’s surface film; it would then be smeared with a paste of charcoal powder mixed in oil.
The art of paper making was introduced into India by the 11th century CE, perhaps from China through Nepal. The earliest extant Indian paper manuscript is dateable to 1105 CE; it was made from the fibers of a mountain plant. By the later half of the 15th century, Kashmir was producing paper of attractive quality from the pulps of rags and hemp, with lime and soda added to whiten the pulp. Sialkot, Zafarabad, Patna, Murshidabad, Ahmedabad, Aurangabad and Mysore were among the well- known centers of paper production.- CUET (UG) - 2025
- Knowledge Tradition - Practices India
- Reading Comprehension
- The arena is also described in the Mallapurāṇa. It is not the mat as is used to-day. The arena is known as ākhādhaka. It is high, levelled and low. Its dimensions are three devamāna (101 hastas or cubits), daityamāna (50 hastas) and martyamāna (21 hastas). It is square, triangular and circular. The earth with kankar, iron, wood, stone, thorn etc. should be avoided. It appears that the general dimension was 21 hastas which is equal to about 30 feet, and the devamāna and daityamāna seem to be more for rhetorics rather than actual use. The earth must be pleasing to see and as soft as that required for seed-laying and should be a hand high and levelled. It should be worshipped and Hari should be placed there and a bījapūraka be placed in the center of the arena. After worshiping 'Govinda' the king should see the wrestling.
- CUET (UG) - 2025
- Knowledge Tradition - Practices India
- Reading Comprehension
- In the counselling process, the professional counsellor may use different techniques. In directive or counsellor-centred counselling, the counsellor plays a major role and does all that is possible to get the counsellee to make decisions in keeping with the diagnosis of the problem. In non-directive or permissive or client-centred counselling, the counsellor’s role is comparatively passive. The counsellee takes an active part in the process of therapy. The person seeking help is encouraged to gain insight into the problem with the help of the counsellor. The counsellee takes the final decisions. Thus, this counselling process turns out to be a growth experience for the person. In eclectic counselling, counsellors who advocate using this type of counselling are of the view that directed or non-directed counselling are two ends of continuum. And counsellors should incorporate suitable techniques from both the types of counselling mentioned above as and when required, depending on the situation, the problem and the temperament of the client.
- CUET (UG) - 2025
- Home Science
- Reading Comprehension
The prisoners in the concentration camps in World War-II had lost faith in the future. Being in the camp, I felt disgusted with the state of affairs and I forced my thoughts to turn to another subject. ”Suddenly, I saw myself standing on the platform of a well-lit, warm and pleasant lecture room. In front of me, the attentive audience were seated in comfortable upholstered seats. I saw myself giving a lecture on hope, optimism, and resilience under difficult circumstances.” Suddenly, all that oppressed me stopped giving me pain and distress. This practice was so impactful that I could succeed in rising above the situation and the sufferings of the moment.”
- CUET (UG) - 2025
- Psychology
- Reading Comprehension
Questions Asked in XAT exam
Match the following renowned Indian personalities with their respective awards.
Names Award 1. Shri Ratan Naval Tata A. Dadasaheb Phalke Award 2. Manmohan Singh B. Grammy Awards 3. Zakir Hussain C. Carnegie Medal of Philanthropy 4. Shyam Benegal D. World Statesman Award - XAT - 2025
- Famous personalities and their contributions
Match the following authors with their respective works.
Authors Books 1. Andy Weir A. Dune 2. Cixin Liu B. The Time Machine 3. Stephen Hawking C. The Brief History of Time 4. HG Wells D. The Martian 5. Frank Herbert E. The Three Body Problem - XAT - 2025
- Books and Authors
Match the following airlines with the countries where they are headquartered.
Airlines Countries 1. AirAsia A. Singapore 2. AZAL B. South Korea 3. Jeju Air C. Azerbaijan 4. Indigo D. India 5. Tigerair E. Malaysia - XAT - 2025
- Business and Economy
The diagram below represents a road network connecting five towns, namely Meeren, Lannisport, Winterfell, Oldtown, and Gulltown. The maximum speed limits along any stretch of road are as shown in the diagram. The straight road that connects Meeren to Gulltown passes through Oldtown. Another straight road, running west to east, connecting Meeren to Winterfell, passes through Lannisport. Further, two straight roads, one from Lannisport to Oldtown and another from Winterfell to Gulltown, are perpendicular to the road joining Meeren to Winterfell, and run from south to north.
Consider a car always travelling at the maximum permissible speed, and always taking the shortest route. It takes 1 hour to reach Oldtown from Meeren, 2 hours to reach Gulltown from Oldtown, and 45 minutes to reach Winterfell from Gulltown. (For this problem, always consider the shortest route in terms of distance.)
- XAT - 2025
- Logical and Analytical Reasoning Skills
The plots below depict and compare the average monthly incomes (in Rs. ’000) of males and females in ten cities of India in the years 2005 and 2015. The ten cities, marked A-J in the records, are of different population sizes. For a fair comparison, to adjust for inflation, incomes for both the periods are scaled to 2025 prices. Each red dot represents the average monthly income of females in a particular city in a particular year, while each blue dot represents the average monthly income of males in a particular city in a particular year. The gender gap for a city, for a particular year, is defined as the absolute value of the average monthly income of males, minus the average monthly income of females, in that year.
- XAT - 2025
- Data Interpretation