Question

Market failure can be caused by low consumer demand. externalities and market power. equilibrium prices. high prices and foreign competition.

Answer 1

Answer:

Externalities and market power.

Explanation:

Market failure is the economic situation defined by an inefficient distribution of goods and services in the free market.

A good has positive externality if the benefits to third parties not involved in production is greater than the cost. an example of an activity that generates positive externality is research and development. Due to the high cost of R & D, they are usually under-produced. Government can encourage the production of activities that generate positive externality by granting subsidies.

A good has negative externality if the costs to third parties not involved in production is greater than the benefits. an example of an activity that generates negative externality is pollution. Pollution can be generated at little or no cost, so they are usually overproduced. Government can discourage the production of activities that generate negative externality by taxation  

When a firm has market power, he usually sell above equilibrium price so that there is no equilibrium in the market. This can lead to inefficiency and market failure