Market failure refers to a situation in which:
A)it is not possible to make some people better off without making other people worse off.
B)markets establish a high price for necessities.
C)market-determined wages are not high enough to raise all workers above the poverty line.
D)markets fail to reach an efficient outcome.

Question

Quizplus · Accepted Answer

Market failure refers to a situation where markets fail to allocate resources efficiently, resulting in an inefficient outcome. This can happen due to various reasons such as externalities, public goods, market power, etc. Therefore, option D is the correct answer. Option A is incorrect because it describes the concept of Pareto efficiency, which is not the same as market failure. Option B is incorrect because high prices for necessities do not necessarily indicate market failure. Option C is incorrect because the poverty line is a policy decision and not necessarily related to market failure.

Market Failure Refers to a Situation in Which