Which of the following is a source of market failure?
A)Unforeseen circumstances which lead to the bankruptcy of many firms
B)A lack of government intervention in a market
C)Incomplete property rights or inability to enforce property rights
D)An inequitable income distribution

Question

Quizplus · Accepted Answer

Incomplete property rights or inability to enforce property rights can lead to market failure, as it can result in a lack of investment and enterprise due to a lack of security in property ownership. This can also lead to externalities, such as pollution, where the cost is not borne by the polluter but by the society at large. Unforeseen circumstances leading to bankruptcy (A) may impact individual firms, but it does not necessarily result in market failure. A lack of government intervention (B) can lead to market failure in certain cases, but it is not always the case. An inequitable income distribution (D) can lead to social and economic problems, but it is not necessarily a direct cause of market failure.

Which of the Following Is a Source of Market Failure