1. Presence of externalities: _

Externalities refer to the impact of production activities of the firms on the welfare of general society where their welfare may be destroyed through negative externalities such as pollution or improved through positive externality such as security camps and medical camps.

_2. Provision of the public good: _

Public goods are goods which are characterized by nonrival ness and nonexcludability. They are solely provided by the government since if left in hands of private firms will lead to market failure.

_3. Asymmetric information_:

Asymmetric information is a source of market failure in the market and means a situation where one party in the market is aware of certain information in the market regarding a given product while the others have no signal about that information which may lead to market inefficiency.