6.The term market failure refers to

a.

a situation in which the market on its own fails to allocate resources efficiently.

b.

an unsuccessful advertising campaign which reduces demand for a product.

c.

a situation in which competition among firms becomes ruthless.

d.

a firm that is forced out of business because of losses.

Question

6.The term market failure refers to

a.

a situation in which the market on its own fails to allocate resources efficiently.

b.

an unsuccessful advertising campaign which reduces demand for a product.

c.

a situation in which competition among firms becomes ruthless.

d.

a firm that is forced out of business because of losses.

BlackTom AI · Accepted Answer

The question asks about the meaning of market failure and provides four statements to evaluate.
Option a: 'a situation in which the market on its own fails to allocate resources efficiently.' This is the standard economic definition of market failure, where voluntary exchanges fail to produce an efficient allocation of resources, often due to externalities, public goods, information problems, or monopoly power.
Option b: 'an unsuccessful advertising campaign which reduces demand for a product.' An unsuccessful campaign may affect a single firm's sales, but it does not imply a broader failure of the market to allocate resources efficiently across the economy. It is a firm-specific outcome, not a market-wide inefficiency.
Option c: 'a situation in which competition among firms becomes ruthless.' Intense competition can occur in healthy markets and does not by itself indicate inefficiency. In some cases, fierce competition improves welfare; market failure would require misallocation or other systemic inefficiencies.
Option d: 'a firm that is forced out of business because of losses.' Individual firm failure can happen for many reasons (poor management, mispricing, exogenous shocks) and does not necessarily reflect a broader failure of the market to allocate resources efficiently; it may instead reflect market dynamics or creative destruction, not a systemic inefficiency.

Similar Questions

A situation where a market, in the absence of intervention, fails to allocate resources efficiently.

Market failure can be defined as

In a free-market economy, government is needed where _____.

The table below shows possible sources of market failure in current UK markets. Which combination of example and policy, A, B, C, D or E, is consistent with the possible source of market failure identified?

The table below shows possible sources of market failure in current UK markets. Which combination of example and policy, A, B, C, D or E, is consistent with the possible source of market failure identified?

Government intervention will result in a more efficient allocation of resources if

Government intervention will result in a more efficient allocation of resources if

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler