Market failure occurs because market participants face the full costs and benefits of their choices.

Question

Quizplus · Accepted Answer

This statement is incorrect. Market failure occurs precisely because market participants do not face the full costs and/or benefits of their choices. Externalities, information asymmetry, and public goods are examples of market failures that arise precisely because market participants do not take into account all the costs and benefits of their actions.

Market Failure Occurs Because Market Participants Face the Full Costs