The correct answer is d. the price system fails to generate an efficient allocation of resources.

Market failures emerge when the pricing mechanism does not include all the costs and benefits required to enable consumption suggesting a less efficient allocation of resources. This causes shortages of supply that compromises the socially optimal amount of the product or service required or accessible by consumers.

Furthermore, market failures occur due to breakdowns in the pricing mechanisms that govern a market. More specifically, the management of resources are challenged by externalities or actions of individuals that affect another person or group and affect market prices. Other factors that contribute to market failures include production inefficiencies, lack of public goods, and environmental considerations.

Answers a, b, and c are incorrect.