Causes of market failure include
A)externalities and market power.
B)market power and incorrect forecasts of consumer demand.
C)externalities and foreign competition.
D)incorrect forecasts of consumer demand and foreign competition.

Question

Quizplus · Accepted Answer

Externalities can lead to market failure by creating unintended costs or benefits that are not reflected in market prices. Market power, on the other hand, can lead to market failure by allowing firms to charge prices higher than marginal cost, resulting in underproduction and inefficiency. Incorrect forecasts of consumer demand and foreign competition may impact individual firms, but they do not necessarily result in overall market failure.

Causes of Market Failure Include