Market failure can occur even when the price signals are accurate.
The market may fail even when the price signals are accurate.The response to price signals,rather than the signals themselves,may be flawed.For example,there may be externalities present.

Question

Quizplus · Accepted Answer

Accurate price signals may not always lead to efficient outcomes if there are externalities present, such as pollution or congestion. In these cases, the response to price signals may be flawed, leading to market failure.

Market Failure Can Occur Even When the Price Signals Are