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Read this section for a more detailed look at the topic of market failure. Attempt the "Try It” problem before checking your answer.
Public sector intervention to increase the level of provision of public goods may improve the efficiency of resource allocation by overcoming the problem of free riders.
Activities that generate external costs are likely to be carried out at levels that exceed those that would be efficient; the public sector may seek to intervene to confront decision makers with the full costs of their choices.
Some private activities generate external benefits.
A common property resource is unlikely to be allocated efficiently in the marketplace.