Which of these is NOT an example of market failure?
A) Water is polluted by a paper company located by the river.
B) Air is polluted by a manufacturing firm.
C) Competition leads firms to provide products at the lowest possible price.
D) Consumers must buy water from one local water utility.

Question

Quizplus · Accepted Answer

Competition leading firms to provide products at the lowest possible price is not an example of market failure. It is actually a desirable outcome of a competitive market. Market failure occurs when the market fails to allocate resources efficiently, resulting in an inefficient allocation of goods and services. Examples of market failure include pollution (A and B) and monopoly power (D).

Which of These Is NOT an Example of Market Failure