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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

What are the two main causes of market failure? Give an example of each.

To determine

The causes of market failure.

Explanation

Market failure occurs when the resources in the market are fail to allocate efficiently. There are two important causes for market failures which are given below.

Externality: Externality is the impact of one person's actions on the well-being of a bystander. The classic example of an externality is pollution. The production of goods emits pollutants which lead to the air pollution that creates health problems for those who live near the production area...

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