Market failure means:
A) Government solutions fail to improve economic outcomes.
B) The market mechanism does not produce the best mix of output.
C) The market allocates goods more efficiently than does the government.
D) The market is responsive to consumer demanD.

Question

Quizplus · Accepted Answer

Market failure occurs when the market mechanism (supply and demand) fails to produce the optimal mix of output that maximizes societal welfare. This happens due to externalities, public goods, and asymmetric information, among other reasons. In such cases, the government intervention may be necessary to correct inefficiencies in the market. Therefore, option B is the best choice. A, C, and D are not correct because they do not accurately describe market failure.

Market Failure Means