Assume PRC Corp., an equipment distributor, sells a piece of machinery with a list price of $600,000 to ACH Inc. ACH will pay $6
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a. When the forces of supply and demand lead to an inefficient outcome: economists call this a market failure.
<h3>What is meant by market failure?</h3>This is the term that has to do with the state where the market that is an economy can be said to not be working.
b. The question in this category needs us to be able to fill in the details from the question into the empty boxes. Therefore:
For the efficient box
- a market in which economic surplus is maximized
For the inefficient box:
- a market transaction in which buyers or sellers behave irrationally
- a market transaction in which one party has information not available to other party
- a market dominated by few powerful businesses
- a market in which government regulation creates distortions
Read more on market failure here:
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