ObjectiveMcq
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Demand-side market failures occur when:
Correct Answer: D — Demand curves do not reflect consumers' full willingness to pay for goods or services
Correct Answer: D
Market failure arises when the market cannot correctly weigh costs and benefits. Demand-side market failures specifically occur when demand curves do not reflect consumers' full willingness to pay — for example, when positive externalities exist (such as education or vaccinations), consumers benefit others beyond themselves but only pay for their own benefit. This means the social value exceeds the private value, resulting in underproduction.