Market failures occur in a variety of situations in which the pursuit of profit will not result in a net increase in consumer satisfaction because in these situations markets fail to do what they were designed to do.

Question

Quizplus · Accepted Answer

Market failures occur when the allocation of goods and services by a free market is not efficient, often leading to a net loss in economic welfare. Situations such as public goods, externalities, and information asymmetries can prevent markets from maximizing consumer satisfaction, thus failing to achieve what they are theoretically designed to do, which is to allocate resources in a way that maximizes consumer and societal welfare.

Market Failures Occur in a Variety of Situations in Which