Which of the following describes the government's role in addressing market failure?

The option that describes the government's role in addressing market failure is focused on the mechanisms of regulation, taxation, and subsidies. When markets fail to allocate resources efficiently, it often leads to negative outcomes such as monopolies, externalities, and unequal distribution of wealth.

Regulation involves creating rules that guide or restrict business practices in order to promote competition and protect consumers. Taxation can be used to correct for negative externalities, such as pollution, by imposing costs on behaviors that generate undesirable outcomes. For instance, carbon taxes aim to reduce greenhouse gas emissions by making it more expensive to pollute. Subsidies, on the other hand, can encourage beneficial activities or support industries that provide public goods, such as education or renewable energy.

By leveraging these tools, the government can help restore a balance in the economy, ensuring that markets operate more effectively and equitably. This intervention is necessary because, without it, markets may fail to function optimally, leading to inefficiencies and inequities that harm society as a whole.