Economics Homework Help

Market failure occurs when the benefits and costs cannot be isolated to the individuals and firms making the immediate transactions. These extra benefits and costs are often referred to as “externalities” and they can take any number of forms. We are most familiar with them in the form of environmental damage that occurs in the production process. But there are many other examples such as the benefits of a good education of one individual benefiting the rest of the community or the potential harm of someone with a contagious disease to the rest of the community.