What is a market failure? A.It refers to the inability of the market to allocate

Question

What is a market failure? A.It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost. B.It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal private cost. C.It refers to a situation where an entire sector of the economy (for example, the airline industry) collapses because of some unforeseen event. D.It refers to a breakdown in a market economy because of widespread corruption in government.

Explanation / Answer

A. IT REFERS TO THE INABILITY OF THE MARKET TO ALLOCATE RESOURCES EFFICIENTLY UP TO THE POINT WHERE MARGINAL SOCIAL BENEFIT EQUALS MARGINAL SOCIAL COST.

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