What does the term market failure refer to?
A)a situation in which the market, on its own, fails to allocate resources efficiently
B)an unsuccessful advertising campaign that reduces demand
C)a situation in which competition among firms is insufficient
D)a firm that is forced out of business because of losses

Question

Quizplus · Accepted Answer

Market failure refers to a situation in which the market fails to allocate resources efficiently, either by underproducing or overproducing goods or services, or by misallocating resources in a way that leads to a deadweight loss of efficiency. This may be due to a variety of factors, such as externalities, market power, imperfect information, public goods, or natural monopolies. Market failure can result in a Pareto inefficient outcome, where it is possible to make some people better-off without making anyone else worse-off.

What Does the Term Market Failure Refer To