What is meant by the term "market failure"?
A)that a small group in society is affected
B)that allocative efficiency has not been achieved
C)that the market economy is a failure
D)that one or more markets are not in equilibrium
E)that the free market has failed to achieve desirable social goals

Question

Quizplus · Accepted Answer

Market failure refers to a situation where the market fails to allocate resources efficiently. This means that allocative efficiency has not been achieved, leading to a misallocation of resources. For example, if a market produces too much of a good with negative externalities (such as pollution) or too little of a good with positive externalities (such as education), then allocative inefficiency has occurred, resulting in market failure.

What Is Meant by the Term "Market Failure