When is market failure likely to arise from a market shortag

When is market failure likely to arise?

-from a market shortage

-when it is difficult to enforce property rights

-from scarcity

-when property rights are incomplete

-from a market surplus

Mark all that apply.

Solution

Market Failure generally happens when allocation of goods and services is inefficient. In other words, market failure occurs when market fails to provide the goods and services in quantum and combination as required by the society.

Allocative inefficiency takes place in case of market failure and market tends to either over-produce or under-produce the goods and services.

So, market failure occurs when either there is market shortage (under-production) or there is market surplus (over-production).

Apart from this, market failure also occurs when it is difficult to enforce property rights as lack of enforcement results in inefficient util;ization of resources.

Hence, the correct answer is

Option 1 - From a market shortage

Option 2 - When it is difficult to enforce property rights.

Option 3 - From a market surplus