ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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false
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true
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Either A or B
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None of the above
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Detailed explanation-1: -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-2: -A market failure is when there is an inefficient distribution of goods and services that leads to a lack of equilibrium in a free market. The law of supply and demand is meant to lead to an equilibrium in prices, and when it does not it indicates a factor in the market has failed.
Detailed explanation-3: -There are four probable causes of market failures; power abuse (a monopoly or monopsony, the sole buyer of a factor of production), improper or incomplete distribution of information, externalities and public goods.
Detailed explanation-4: -The two leading causes of market failure are externality and market power.