Final answer:
Market failures are caused by factors that prevent efficient allocation of resources such as externalities and monopoly power, which lead to imbalances in social costs and benefits. Option c, which includes both monopoly power and externalities, accurately represents causes of market failure.
Step-by-step explanation:
Market failures occur when the market does not allocate resources efficiently, leading to a mismatch of social costs and benefits. An example of such a failure is when externalities, such as pollution, affect third parties not involved in the initial transaction. Externalities and monopoly power are influential factors that can lead to market failure. In the context of the given options, c. Monopoly power and externalities best reflects the causes of market failure, as both create situations where the free market does not lead to socially optimum outcomes.
Inadequate competition among producers, lack of information available to buyers and sellers, resource immobility, and externalities are the primary reasons economists consider there to be a market failure. Government economic policies can sometimes address negative impacts caused by market structures, such as monopoly and imperfect competition, illustrating further complexity in the relationship between market failures and government intervention.