Market failure occurs when market forces lead to:
A)high price.
B)high quantity.
C)an inefficient outcome.
D)a marginal benefit that is equal to marginal cost.

Question

Quizplus · Accepted Answer

Market failure occurs when market forces do not lead to an efficient outcome, meaning that there is a wasted allocation of resources in the economy. This can be due to externalities, public goods, asymmetric information, or monopolies/power imbalances in the market. High prices and high quantity are not necessarily indicative of market failure, and a situation where marginal benefit is equal to marginal cost is actually considered efficient, not indicative of market failure.

Market Failure Occurs When Market Forces Lead To