Which of the Following Is an Example of Market Failure

question 7

Multiple Choice

Which of the following is an example of market failure?

• A)a firm becomes insolvent and is forced out of the market
• B)a firm's research and development fails to develop a new product
• C)a firm closes down a factory due to poor sales
• D)a firm's pollution into a river reduces the number of fish that can be caught

Understand the key factors influencing inflation and unemployment rates.

Identify and describe phases of the business cycle (expansion, peak, recession, trough).

Analyze the impact of unanticipated inflation on creditors and debtors.

Recognize various types of unemployment (frictional, structural, cyclical).

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Definitions:

Rational Self-Interest

The principle that individuals tend to make decisions that they perceive to be the best for their own welfare and success.

Collude

A secret or illegal cooperation or conspiracy, especially between parties to deceive or defraud others.

Reserve Price

A reserve price is the minimum price a seller is willing to accept for an item at auction; if bids do not reach this price, the item is not sold.

Private Values

A situation in auctions where the value of an item is known only to the bidder, not affecting the valuation of the item by other bidders.