Which of the following is an example of market failure?
A)Overuse of highways that leads to traffic congestion
B)Reduced levels of vaccinations which increase illness and disease
C)Substantial foreclosures caused by sub-prime lending
D)All of the answers are examples of market failure.

Question

Quizplus · Accepted Answer

All of the given options are examples of market failure. Overuse of highways causing traffic congestion is an example of negative externalities where the cost of congestion is not directly borne by the user but by society as a whole. Reduced levels of vaccinations leading to an increase in illness and disease is another example of negative externalities. Sub-prime lending leading to a high number of foreclosures is an example of information asymmetry and moral hazard.

Which of the Following Is an Example of Market Failure