A market failure arises when an entire sector of the economy (for example, the airline industry)collapses because of some unforeseen event.

Question

Quizplus · Accepted Answer

A market failure does not necessarily refer to the collapse of an entire sector of the economy, but rather to a situation where the market fails to allocate resources efficiently, leading to inefficiencies or negative externalities. The collapse of a sector due to an unforeseen event may be a consequence of market failure, but it is not an accurate definition of the concept itself.

A Market Failure Arises When an Entire Sector of the Economy