When market failures occur
A) the invisible hand will correct for the market failures.
B) the price system will correct the market failures.
C) buyers and sellers will correct the market failures.
D) the government can step in to correct the market failures.

Question

Quizplus · Accepted Answer

When market failures occur, it is often difficult for the invisible hand, price system, or buyers and sellers alone to correct the market failures. This is because market failures often result from externalities, public goods, asymmetric information, or market power. In such cases, the government can step in to correct the market failures through regulations, taxes, subsidies, public provision, or antitrust enforcement. Therefore, D is the best choice.

When Market Failures Occur