Final answer:
Market failure occurs when the market does not allocate resources efficiently due to factors like lack of perfect competition, externalities, inadequate information, resource immobility, and non-production of public goods.
Step-by-step explanation:
Market failure occurs when the market does not produce the optimal quantity of output or fails to allocate resources efficiently in a way that balances social costs and benefits.
Causes of market failure include lack of perfect competition, externalities such as pollution or negative effects on third parties who are outside a transaction, inadequate information for consumers or producers, resource immobility, and the non-production of public goods.
These factors can disrupt the balance between supply and demand, leading to inefficient outcomes where either the producer or the consumer, or sometimes both, are disadvantaged.
Market failure refers to a situation in which the market does not allocate resources efficiently, resulting in suboptimal outcomes. It can be caused by a lack of perfect competition and a variety of other factors. For example, when there is inadequate competition among producers, they may be able to set high prices and limit output, leading to less than the optimal quantity of goods being produced.
Both of the above options are correct. Market failure can occur when the market does not produce the optimal quantity of output and can be caused by a lack of perfect competition.