Sources of market failure include
A) external benefits.
B) external costs.
C) public goods.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

Market failure can occur due to external benefits (when the social or economic benefits of a product or service are not reflected in its market price), external costs (when the production or consumption of a product or service imposes costs on third parties that are not reflected in the market price), and public goods (which are non-excludable and non-rivalrous, leading to issues like free-riding). All these factors can prevent markets from efficiently allocating resources, hence they are considered sources of market failure.

Sources of Market Failure Include