Market failure occurs when

A) firms that are incurring losses leave a market.
B) perfectly competitive firms produce where MR = MC.
C) resources are misallocated, or allocated inefficiently.
D) firms are only able to earn a normal profit.

Market Failure

A situation in which the allocation of goods and services by a free market is not efficient, often justifying government intervention.

Misallocated

Describes resources or efforts that are used inefficiently or inappropriately, leading to suboptimal outcomes.

Perfectly Competitive

A market structure characterized by a large number of small firms, homogeneous products, and free entry and exit, leading to price takers rather than makers.