Practice Quiz

AP Microeconomics

Category - Microeconomics

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What is the difference between a level of production that would be optimal for society and the actual market level?
  1. Spillover costs
  2. Coase theorem
  3. Market failure
  4. Negative internality
Explanation
Answer - C - The difference between a level of production that would be optimal for society and the actual market level is a market failure.

Key Takeaway: Market failure refers to the difference between the level of production of goods and services that would be optimal society and the actual market level. Market failures are typically scenarios in which the discrepancy is caused by individuals' pursuit of self-interest leads to results that are not efficient for society as a whole.
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