Market failure may lead to

Question

Quizplus · Accepted Answer

Market failure occurs when the market does not allocate resources efficiently, resulting in an inefficient allocation of goods and services. One example of market failure is the underproduction of public goods, which are goods that are non-excludable and non-rivalrous in consumption. Because of their characteristics, public goods are often undersupplied by the market and may require government intervention to provide. Therefore, B is the correct answer. A, C, and D are incorrect because equitable distribution, absence of externalities, and production possibilities may not necessarily be affected by market failure.

Market Failure May Lead to