ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Externalities lead to market failure because a product or service’s price equilibrium does not accurately reflect the true costs and benefits of that product or service.

Detailed explanation-2: -Neoclassical economists long ago recognized that the inefficiencies associated with technical externalities constitute a form of “market failure.” Private market–based decision making fails to yield efficient outcomes from a general welfare perspective.

Detailed explanation-3: -Market failure can be caused by a lack of information, market control, public goods, and externalities. Market failures can be corrected through government intervention, such as new laws or taxes, tariffs, subsidies, and trade restrictions.

Detailed explanation-4: -Market failure occurs when there is a state of disequilibrium in the market due to market distortion. It takes place when the quantity of goods or services supplied is not equal to the quantity of goods or services demanded.

Detailed explanation-5: -A classic example of a negative externality is pollution that results from the production of a good in a factory. Individuals living around the factory are exposed to the pollution and may cause them health issues.