What is a market failure? What causes market failure?

Market failure:\x0d\　Market failure refers to the situation where the market cannot allocate goods and services efficiently. To economists, the term is usually used when inefficiencies are particularly significant, or when non-market institutions are more efficient and have a greater ability to create wealth than private choices. On the other hand, market failure is often used to describe a situation in which market forces fail to meet public interests. Here we focus on the mainstream views of economics. Economists use modeling theory to explain or understand this situation. The two main reasons for market failure are: inappropriate communication of cost or profit prices, which in turn affects the individual economic market decision-making mechanism. Sub-optimal market structure. \x0d\ Reasons: \x0d\ 1. Public products: \x0d\ The products produced by the economy and society can be roughly divided into two categories, one is private items and the other is public items. Simply put, personal items are items that are only for personal enjoyment, such as food, housing, clothing, etc. Public items are items that can be enjoyed by members of society. Public goods in the strict sense are non-rivalrous and non-excludable. Non-excludability means that one person's enjoyment of public goods does not affect another person's enjoyment. Non-rivalry means that the increase in consumers will not cause an increase in production costs. For example, national defense is a public item. It brings security to the people. When citizen A enjoys national security, it will not affect citizen B's enjoyment of national security at all, and people can enjoy this security without spending money. \x0d\\x0d\ 2. Monopoly: \x0d\ A certain degree of (such as oligopoly) and complete monopoly on the market may make the allocation of resources inefficient. Correction of this situation requires the power of the government. The government mainly improves the economic efficiency of enterprises through intervention in the market structure and enterprise organizational structure. Intervention in this area falls under the government's industrial structure policy. \x0d\\x0d\ 3. External influences: \x0d\ Market economic activities are based on reciprocal transactions, so people's interest relationships in the market are essentially interest relationships related to money. For example, if A provides goods or services to B, A has the right to seek compensation from B. When people engage in such economic activities that require payment or acquisition of money, they may also have some other effects on other people, which can be beneficial or harmful to others. However, whether beneficial or harmful, it is not a transactional relationship. These impacts on others outside of transaction relationships are called external impacts, also known as the externalities of economic activities. For example, the wastewater discharged from a factory built near a river pollutes the river and causes harm to others. The factory discharges wastewater in order to produce products to make money. The relationship between the factory and the customers who buy its products is a money exchange relationship. However, the factory may not need to pay any compensation to others for the damage caused to others. This impact is the external impact of factory production. When this effect is harmful to others, it is called external diseconomies. When this influence benefits others it is called external economics. For example, the flowers you put on your balcony may bring external economic benefits to people passing by. \x0d\ 4. Asymmetric information: \x0d\ Since participants in economic activities have different information, some people can use information advantages to commit fraud, which will harm legitimate transactions. When people's concerns about fraud seriously affect trading activities, the normal function of the market will be lost, and the market's function of allocating resources will fail. At this time, the market generally cannot completely solve the problem by itself. In order to ensure the normal operation of the market, the government needs to formulate some regulations to restrict and stop fraudulent activities.