XAT 2015 Question 27
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XAT
Option B can be concluded from the line, "market competition solved adverse selection problems and the fixed - price contracts associated with exogenous prices solve moral hazard problems."
Option C can be concluded from the line, "Voting mechanisms are particular incentive mechanisms without any monetary transfers."
Options D and E can be concluded from the line, "When the monopoly has private information about its cost or demand, its regulation by a regulatory commission becomes a principal - agent problem."
Option A cannot be concluded as the passage states that public intervention is necessary when "markets fail for pure public goods". It does not apply to the private goods market.
Hence, the answer is option A.