When an alternative to the current allocation of resources exists that would increase society's welfare:
A) there is market failure.
B) the efficiency condition is met.
C) decisionmakers have faced the marginal benefits and marginal costs of their decisions.
D) producers have maximized total cost.

Question

Quizplus · Accepted Answer

Market failure occurs when the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss. An alternative allocation that could increase society's welfare indicates that the current market allocation is not optimal, hence a market failure.

When an Alternative to the Current Allocation of Resources Exists