Market failures occur when markets fail to allocate resources efficiently. Externalities, public goods, and information asymmetry are common sources of market failure that justify government intervention.

Negative externalities such as pollution impose costs on society that are not reflected in market prices. Policy tools such as taxes, regulations, or cap-and-trade systems aim to internalize these external costs.

Public goods like national defense and public infrastructure are non-excludable and non-rival, leading to under-provision by private markets. Government provision is often necessary to ensure adequate supply.

Information asymmetry can result in adverse selection and moral hazard, particularly in insurance and financial markets. Regulatory oversight and disclosure requirements help mitigate these problems.

Addressing market failures effectively requires well-designed policies that balance efficiency and administrative feasibility.

Market failures occur when markets fail to allocate resources efficiently. Externalities, public goods, and information asymmetry are common sources of market failure that justify government intervention.

Negative externalities such as pollution impose costs on society that are not reflected in market prices. Policy tools such as taxes, regulations, or cap-and-trade systems aim to internalize these external costs.

Public goods like national defense and public infrastructure are non-excludable and non-rival, leading to under-provision by private markets. Government provision is often necessary to ensure adequate supply.

Information asymmetry can result in adverse selection and moral hazard, particularly in insurance and financial markets. Regulatory oversight and disclosure requirements help mitigate these problems.

Addressing market failures effectively requires well-designed policies that balance efficiency and administrative feasibility.