Which one is NOT a market failure? a

Marketing Dec 28, 2020

Which one is NOT a market failure?

a. Macroeconomic instability

b. Externalities

c. Market power

d. Price controls

Expert Solution

The correct answer is a. Macroeconomic instability.

The price and output levels are out of equilibrium in the three other options. During periods of economic instability, however, the supply and/or demand curve will shift and the market will adjust to the new equilibrium point. Therefore, even if output changes, markets will not be experiencing market failure because the market will be in equilibrium.

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