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Given these characteristics, the private sector has little incentive to produce public goods, which leads to market failure, and the government usually has to provide these goods or subsidize their production. Public goods are also nonrival, as use by one individual does not limit consumption by others. Public goods and services are nonexcludable-once something like a street light is produced, it is accessible to everyone, and the producer cannot limit consumption only to paying customers.

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Public goods: Public goods are another example of market failure because they defy the tenets of supply and demand that drive the free markets.In either case, the disrupted balance of supply and demand could cause market failure. In other situations, known as monopsony or oligopsony, it is the buyers that have the advantage. In the case of a monopoly or oligopoly, a single seller or a small group of sellers can manipulate pricing.

Market control: When one party has too much control over a market, this can also create imbalanced pricing and lead to market failure.

If the buyer or seller in a transaction lacks access to the information on which the price is based, they may be willing to overpay or undercharge for a good or service, disrupting the market's equilibrium.

Information failure: When there is insufficient information available to certain participants in the market, this can also be the source of market failure.

The collateral damage caused by negative externalities may lead to market failure. Pollution resulting from the production of certain goods is an example of a negative externality that can hurt individuals and communities.

Externalities: Externalities occur when the consumption of a good or service benefits or harms a third party.