Economics · Market Failure
Which of the following scenarios is a primary example of market failure?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Market prices fail to reflect the full social costs of production.✓
- 2Prices rise due to demand shifts so that consumers buy fewer goods.
- 3Demand falls during a recession causing firms to reduce workforce.
- 4A firm shuts down because there is no market demand for its product.
Correct answer
Market prices fail to reflect the full social costs of production.
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