Question

29. Which of the following is an example of market failure (when the quantity produced and consumed are not socially efficient)?

a) Monopoly

b) Oligopoly

c) External costs

d) All of the above

Answer 1

Monopoly , Oligopoly and external costs are examples of market failure. Because market failure indiactes the inefficient allocation of goods and services in an economy. This can be because of externalities , monopoly structure or oligopoly. Market failure occur due to variety of reasons : Under Monopoly and oligopoly due to higher prices and lower output , under negative externalities i.e presence of external cost due to over -consumption.

Hence, option(D) is correct.