Final answer:
The presence of market failures suggests a need for government intervention in a market system to address issues such as inadequate competition and negative externalities. However, government actions also have limitations and should be carefully evaluated alongside market strengths and weaknesses.
Step-by-step explanation:
The presence of market failures implies that there's an active role for government, even in a market system. Market failures occur when conditions such as adequate competition, well-informed buyers and sellers, free mobility of resources, and prices that reflect production costs are not met. Common market failures include inadequate competition, the lack of public goods, resource immobility, and the occurrence of externalities like pollution that affect third parties.
While the government may intervene to address these market failures, its actions are not perfect and may not reflect majority views. Therefore, the strengths and weaknesses of both market mechanisms and government interventions must be assessed. The government's role can be crucial in implementing policies such as marketable permit programs to manage negative externalities and ensure more efficient resource allocation.
Market failures do not negate the effectiveness of money as a tool for exchange, nor do they suggest that command systems are inherently superior to market systems or that individual self-sufficiency is preferable over specialization.