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Homework answers / question archive / The term "market failure" a
The term "market failure"
a. means the same thing as "market power."
b. refers to the dissolution of a market when firms decide to quit producing a certain product.
c. refers to the failure of a market to produce an efficient allocation of resources.
d. refers to the government's failure to enforce the property rights of households or firms that participate in a certain market.
The correct answer is (c). When a market inefficiently produces allocation of the resources is known as market failure. There is no reflection of the commodities' actual cost in the prices. Such may result from imposition of cost to the third party without their approval and benefits.
