Market failures occur when
A) externalities exist.
B) wages increase.
C) there is an increase in demand.
D) there is a change in quantity demanded.

Question

Quizplus · Accepted Answer

Market failures occur when externalities exist, which are costs or benefits incurred by individuals or a group that are not reflected in market prices. This can lead to an inefficient allocation of resources and a suboptimal outcome for society as a whole. Wages, demand, and quantity demanded are all microeconomic factors that may affect market outcomes, but they do not necessarily result in market failures.

Market Failures Occur When