Why are externalities considered a cause of market failure?

Question

Quizplus · Accepted Answer

Externalities cause market failure because they lead to suboptimal outcomes, where the marginal social cost or benefit differs from the marginal private cost or benefit. This results in inefficiencies in the market, as the production or consumption of a good or service does not take into account the costs or benefits imposed on or received by third parties. This leads to market failure, as the market fails to allocate resources efficiently.

Why Are Externalities Considered a Cause of Market Failure