Government intervention may be necessary to correct market failures from "summary" of Public Finance by Harvey S. Rosen
When markets fail to allocate resources efficiently, it can result in a variety of problems such as monopolies, externalities, and public goods. In these situations, government intervention may be necessary to correct these market failures. One common market failure is the presence of monopolies, where one firm has the power to control prices and output in a particular market. This can lead to higher prices for consumers and lower levels of production than would be efficient. In such cases, the government may need to regulate the market or break up the monopoly to promote competition and ensure efficiency.
Externalities are another type of market failure that occurs when the actions of one party impose costs or benefits on others who are not involved in the transaction. For example...
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