Market failure

This occurs when a market fails to allocate resources efficiently, or fails to account for real-world costs. This can occur because of externalities, such as the pollution emitted by a chemical plant which is a cost that falls on people with no economic connection to the chemical company. Some goods (public goods), such as defence or roadbuilding, can only (or mainly) be supplied by the public sector since they are subject to the free rider problem. Market failures can occur if an industry is dominated by a monopoly or monopsony, or in the presence of asymmetric information.