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© 2009 Pearson Education, Inc. Publishing as Prentice Hall   Principles of Economics 9e by Case, Fair and Oster

The Sources of Market Failure

market failure  Occurs when resources are misallocated, or allocated inefficiently. The result is waste or lost value.

There are four important sources of market failure:

(1)

imperfect market structure, or noncompetitive behavior,

(2)

the existence of public goods,

(3)

the presence of external costs and benefits, and

(4)

imperfect information.

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