Market failure occurs when:
A) markets are competitive.
B) private decisions do not result in an efficient allocation of scarce resources.
C) private decisions result in an efficient allocation of scarce resources.
D) private decisions generate the highest level of consumer satisfaction.

Question

Quizplus · Accepted Answer

Market failure occurs when private decisions do not result in an efficient allocation of scarce resources. This can happen due to externalities, public goods, lack of competition, and asymmetric information. Market failure results in a welfare loss and the need for government intervention. Option A, C, and D are all incorrect as they do not correctly define market failure.

Market Failure Occurs When