Question

Why does the government need to handle market failures?(1 point)
Responses

The natural forces of a free market do not tend to fix market failures due to individuals and producers making decisions based on their own self interest.
The natural forces of a free market do not tend to fix market failures due to individuals and producers making decisions based on their own self interest.

Market failures indicate a scarcity of resources, so it must be managed.
Market failures indicate a scarcity of resources, so it must be managed.

The natural forces of a free market tend to over correct for market failures.
The natural forces of a free market tend to over correct for market failures.

Market failures occur when goods or services are excludable.

Answer 1

The first option (the natural forces of a free market do not tend to fix market failures because individuals and producers act in their own self‑interest) — government intervention is needed to correct externalities, provide public goods, curb monopolies, and fix information problems.