The five cases of market failure typically include:
- Externalities - When a transaction affects third parties who are not involved in it, leading to costs or benefits not reflected in market prices (e.g., pollution).
- Public Goods - Goods that are non-excludable and non-rivalrous, leading to underproduction in a free market since individuals cannot be easily charged for their use (e.g., national defense).
- Common Property Resources - Resources that are accessible to all but can be overused (e.g., fisheries, forests).
- Asymmetric Information - A situation where one party has more or better information than the other, affecting transactions (e.g., used car sales).
- Market Power (Monopoly and Imperfect Competition) - When a single firm or a group of firms can control prices and exclude competitors.
From the options provided, "externalities and open-market policy" does not fit as a distinct case of market failure compared to the others listed. Open-market policy relates more to economic policy than market failure itself. Thus, the correct answer is:
externalities and open-market policy.