Economic theory suggests that market failure is a result of:
A) the quantity demanded exceeding the quantity supplied.
B) the quantity supplied exceeding the quantity demanded.
C) prices that are too high or too low.
D) markets not reflecting and revealing the full costs and benefits of choices.

Question

Quizplus · Accepted Answer

Market failure occurs when prices do not reflect the full costs and benefits of choices. This can lead to inefficient allocation of resources and failure to achieve Pareto efficiency. Other options (A, B, and C) describe issues of supply and demand that may impact the market, but do not necessarily result in market failure.

Economic Theory Suggests That Market Failure Is a Result Of