State true or false and justify your answer: Market failure refers to a situation in which the market does not allocate resources efficiently

• The above statement is true.

Market refers to a place or platform that allows people within an economy to exchange goods and services. Market failure refers to an economic situation where goods and services are not efficiently distributed within the entire economy. This situation is most common in a free-market economy where demand and supply forces affect the economy. The inefficient distribution of resources within the economy emanate from people acting on their self-interests, thus producing goods and services that are economically insufficient. Market failure can be eliminated using either government, private or voluntary actions. If not controlled, market failure can create monopoly power, which has negative impacts on the entire economy.