Which of the following is a source of market failure?
A) unforeseen circumstances which lead to the bankruptcy of many firms
B) a lack of government intervention in a market
C) incomplete property rights or inability to enforce property rights
D) an inequitable income distribution

Question

Quizplus · Accepted Answer

Incomplete or unenforceable property rights can lead to market failure because it allows for externalities, such as pollution, to go unaccounted for and cause harm to third parties. This can result in inefficient allocation of resources and a failure of the market to achieve optimal outcomes. Unforeseen circumstances (A) can lead to market disruptions but do not necessarily imply a market failure. A lack of government intervention (B) may lead to market inefficiencies, but is not inherently a source of market failure. Inequitable income distribution (D) is a concern from a social welfare perspective, but does not necessarily indicate market failure.

Which of the Following Is a Source of Market Failure