Join ExamsbookAnswer : 1. "Prices do not reflect the full social cost of production"
Which of the following is an example of market failure?5
Q: Which of the following is an example of market failure?
- 1Prices do not reflect the full social cost of productiontrue
- 2A firm goes out of business because it cannot find a market for its productsfalse
- 3Prices rise so that the consumers cannot afford the products they want to buyfalse
- 4Producer surplus is maximizedfalse
- Show AnswerHide Answer
- Workspace
Answer : 1. "Prices do not reflect the full social cost of production"
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.