Market failures Public and Externalities

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Expert Solution

Market failure is based on the idea that market place cannot provide public goods or handle externalities.
The quantity of a product demanded by consumers does not equate to the quantity supplied by suppliers.
Externalities undermine the social benefits of Individual selfishness.
Public health programs, Education,Roads research and development, clean Environment all have been labelled as public goods.
Markets fail if there are no property Rights and negotiation is costly..
Market failure occurs due to inefficiency in the allocation of goods and services.
It occurs when the market does actually function.
But produces either wrong quantity or. Of a product or at the wrong price.
Market failure occurs when it is unable to manage its resources..
Breakdown of price mechanism caused by externality or market power.
Negative externality occurs when social cost is better than private cost.
Therefore externality is not taken into account and the social cost is ignored.
Hence market failure occurs.

Rahul Sunny answered 1 year ago

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