A market failure:
A) is a source of inefficiency in an imperfectly competitive economy.
B) can always be corrected by government intervention.
C) cannot be corrected.
D) is a theoretical proposition that has never been proven to exist.

Question

Quizplus · Accepted Answer

A market failure is a situation where the market fails to allocate resources efficiently due to factors such as externalities, public goods, and imperfect competition. While the government can intervene to try to correct the market failure, it is not always possible to do so, and intervention may also come with its own inefficiencies.  Therefore, option B is incorrect, and option C is only partly true. Option D is also incorrect as there is ample evidence of market failures in different industries and markets.

A Market Failure