Question

Which of the following statements about market failure is not true: Question 14 options:

A. Market failure always results from some government action or policy in a market.
B. Market failure can come from causes on the demand-side or the supply-side of a market.
C. Market failure can result from the number of sellers in a market being too few to ensure competition.
D. Market failure causes an inefficient allocation of resources, even in a competitive market.

Answer 1

Answer: Option A

Explanation: Government intervention is a very rare factor leading to failure of a market to operate. Usually the market failure happens because of some differences in demand and supply in the market and the government intervenes to correct the situation.

In fact, market failures happens in free markets in which the intervention from government is very minimal.

Hence from the above we can conclude that the correct option is A.