Market failure means that
A) the strike organized by unionized employees fails to achieve its goal.
B) too many outdated products are offered for sale in the local supermarket.
C) there is overallocation or underallocation of resources to certain economic activity.
D) an unexpectedly harsh winter shuts down a factory.

Question

Quizplus · Accepted Answer

Market failure occurs when there is an inefficient allocation of resources in the market, leading to overproduction, underproduction or allocation of resources that is not aligned with what is most socially efficient. This can result in negative externalities, such as pollution or overuse of natural resources, or positive externalities, such as the benefits of education or research and development, not being fully taken into account by market participants. A and D are not examples of market failure, and B is not a clear example of market failure as it could be due to a variety of factors such as consumer preference or supplier availability.

Market Failure Means That