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In economics, "market failure" occurs when: A
In economics, "market failure" occurs when:
A. an enterprise fails to make profit in its area of expertise.
B. all market prices are low.
C. there is an inefficient allocation of goods and services required by the general community.
D. there is an excessive supply of goods and services.
Expert Solution
The correct answer is C. there is an inefficient allocation of goods and services required by the general community.
Market failure is one of the negative outcomes of a free market economy. Generally, market failure is defined as the situation in which the free market does not allocate efficiently the scarce resources in society. Some of the most common types of market failures are monopolies, inequality, moral hazard, and negative externalities.
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