Q:
      
      
         
            
Which of the following is an example of market failure?
         
       
      
      
      
          
      
      
          Answer & Explanation
         Answer: A) Prices do not reflect the full social cost of production         
         
Explanation: Prices do not reflect the full social cost of production is an example of Market failure.
 
A market failure occurs when the supply of a good or service is insufficient to meet demand. This results in an inefficient distribution of resources among market participants.
It also occurs if externalities are not accounted for.
If a firm fails to maximize its profits this is not a general market failure.
       
      
      
      
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