When markets don't align self-interest with social interest:

Question

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When markets fail to align self-interest with social interest, the government can introduce policies to change incentives and align the interests. This can lead to a more optimal outcome for both individuals and society as a whole. Examples of such policies include taxes, subsidies, regulations, and public goods provision. A and C are incorrect because markets may not always reach an efficient outcome or result in societal costs exceeding individual benefits. D is incorrect because it is the opposite of what is likely to occur when there is a divergence between self-interest and social interest.

When Markets Don't Align Self-Interest with Social Interest