Question

Which of the following is an example of market failure?
A) Prices do not reflect the full social cost of production
B) A firm goes out of business because it cannot find a market for its products
C) Prices rise so that the consumers cannot afford the products they want to buy
D) Producer surplus is maximized

Answer 1

The correct answer is

Prices for not reflect the full social cost of production

Answer 2

C) Prices rise so that the consumers cannot afford the products they want to buy