An example of a market failure is
A) a firm is dumping toxic waste that is making people sick.
B) when not everyone who wants to see a major league football game can.
C) when there is an increase in gasoline demand and a shortage develops.
D) when the market prices of some vehicles are too high for some buyers.

Question

Quizplus · Accepted Answer

When a firm is dumping toxic waste that is making people sick, it is an example of market failure because the market is not accounting for the negative externalities (in this case, the pollution causing harm to people's health) that the firm's actions are creating. The cost of the pollution is not being paid by the firm (or passed on to the consumers) and is instead being borne by those affected by the pollution (i.e., the public).

An Example of a Market Failure Is