Market failure can be caused by
A)too much competition.
B)externalities.
C)low consumer demand.
D)scarcity.

Question

Quizplus · Accepted Answer

Market failure occurs due to the presence of externalities, which are costs or benefits that affect people who are not directly involved in a transaction. For example, pollution is a negative externality that can harm people who aren't involved in producing or consuming a particular good or service. When these external costs or benefits are not accounted for in the market mechanism, resources are not allocated efficiently, resulting in market failure. A, C, and D are not correct as they do not directly relate to market failure caused by externalities.

Market Failure Can Be Caused by