Economists suggest that a market can fail if
A)consumers have to pay more than they want to.
B)producers get smaller profits than they desire.
C)governments dictate prices.
D)the buyer or seller exerts significant power such that they can dictate price.

Question

Quizplus · Accepted Answer

When either the buyer or seller has significant power to dictate price, it can lead to a market failure. This is known as a monopolistic or oligopolistic market structure, where there is little competition and the dominant player(s) can set prices higher than what would happen in a competitive market. In this scenario, the market doesn't allocate resources efficiently, leading to economic inefficiencies. Options A and B relate to consumer and producer surplus, which are not necessarily indicative of market failure. Option C refers to government intervention in the market, which may or may not lead to market failure depending on the context.

Economists Suggest That a Market Can Fail If