Asked by Kiana Moore on Jul 15, 2024
Verified
Sources of market failure include
A) private goods.
B) competitive behavior.
C) externalities.
D) unequal income distribution.
Market Failure
An economic situation in which the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss.
Competitive Behavior
Actions taken by companies or individuals to gain an advantage in the market, often through pricing, product differentiation, and advertising.
Externalities
Economic side effects or consequences that affect uninvolved third parties, which can be either positive or negative.
- Outline the sources contributing to market failure, with a focus on externalities, public goods, and imperfect knowledge.
Verified Answer
KJ
Katelund JonesJul 18, 2024
Final Answer :
C
Explanation :
Externalities are a primary source of market failure because they occur when the production or consumption of a good or service has an effect on a third party that is not reflected in the market price. This can lead to overproduction or underproduction from a societal perspective.
Learning Objectives
- Outline the sources contributing to market failure, with a focus on externalities, public goods, and imperfect knowledge.