Public goods are examples of market failure because they are non-excludable and non-rivalrous, meaning that individuals cannot be effectively excluded from using them, and one person's use does not diminish another's. This leads to under-provision, as private firms lack the incentive to produce them since they cannot easily charge consumers. Consequently, public goods like national defense or clean air are often provided by the government to ensure their availability, as the market fails to supply them efficiently.
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