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Homework answers / question archive / Market failures can result from: A
Market failures can result from:
A. government intervention
B. lack of full information on the part of the consumer
C. monopoly power
D. all of the above
The correct answer is D all of the above
All of the above choices can lead to market failure. Through government intervention failure of markets can be caused by poor resource allocation. Example: If a government doesn't allocate resources, let's say in the transport sector to reduce traffic, the market will adversely be affected through the time wasted by commuters and business people using the roads.
Lack of information to consumers causes market failure. This occurs when a consumer doesn't have information on the good or service they intend to purchase. Example: If the potential customer of an insurance company lacks the company's information on its website, there is a high probability the customer won't purchase the insurance services leading to market failure.
Monopoly power can lead to market power in case the monopoly authority is abused. This is where the faulty markets limit output to maximize business profits.