Market failure occurs when
A) an optimal allocation of society's resources is not achieved
B) negative externalities are taken into consideration
C) positive externalities are taken into consideration
D) government failure is at its worst
E) all social costs are included in the prices of goods and services

Question

Quizplus · Accepted Answer

Market failure is defined as a situation where the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss. This occurs when the market does not allocate resources in a way that achieves the highest form of societal welfare, hence option A is correct.

Market Failure Occurs When