Answer:
The answer is C. a market failure
Explanation:
Externalities lead to market failure because a product or service's price equilibrium does not accurately reflect the true costs and benefits of that product or service.
Answer:
The correct answer is letter "C": a market failure.
Explanation:
Some economists argue that market failure occurs due to externalities. Market failure refers to the unequal distribution of goods or services. Externalities are benefits or costs that individuals, who are not involved in causing the externality, receive or pay.
The typical example of externality relates it to pollution. Companies causing pollution are strictly fined or imposed limits that restrict the firm's profits. Then, to mitigate the losses, those companies increase their products' prices which eventually affect final consumers.
