A situation in which the market system allocates too few resources to the production of a given activity is known as
A) market allocation.
B) market failure.
C) market efficiency.
D) market signaling.

Question

Quizplus · Accepted Answer

Market failure refers to the situation where the market system, left to its own devices, leads to an inefficient allocation of resources. This can happen when the market fails to produce or allocate enough resources to a particular activity, such as public goods (like national defense) or resources that have negative externalities (like pollution). In these cases, the government may choose to intervene in order to correct the market failure and ensure a more efficient allocation of resources.

A Situation in Which the Market System Allocates Too Few