Which of the following scenarios would be considered a market failure?

Market failure occurs when the allocation of goods and services by a free market is not efficient, leading to a net loss of economic welfare. Each scenario presented can lead to such inefficiencies, thus qualifying as market failures.

In the case of externalities, when third parties are affected by the economic activities of others and do not pay or receive compensation, it results in positive or negative impacts not reflected in the costs of goods or services. For example, pollution from a factory affects the health of nearby residents, creating a social cost that is not accounted for in the price of the factory's products. This disconnect leads to overproduction or underproduction relative to what would be socially optimal.

Oligopolies, characterized by a small number of firms dominating a market, can lead to market failure as they may engage in collusion or tacit cooperation to set prices above competitive levels. This can restrict output and raise prices, resulting in consumers facing fewer choices and potentially lower quality goods or services.

Monopolies, where a single firm monopolizes a market, also lead to market failure as they have significant pricing power. Monopolies often set prices at a level that maximizes their profits at the expense of consumer surplus, leading to allocative inefficiency where the