Question

Demand-side market failures occur when A) demand curves don't reflect the full cost of producing a good or service. B) a good or service is not produced because no one wants it. C) demand curves don't reflect consumers' full willingness to pay for a good or service. D) government imposes a tax on a good or service.

Answer 1

Answer:

C) demand curves don't reflect consumers' full willingness to pay for a good or service.

Explanation:

The demand-side market failure comes into picture when it is impossible to know and charge the consumers what the consumers are willing to pay for good or service. Thus, the demand curve do not reflect full willingness of the consumers to pay for good or service.

The situation results in"free-rider problem" in which the consumers enjoy good without paying for it actually.