<P> Given the tension between, on the one hand, the undeniable costs to society caused by market failure, and on the other hand, the potential that attempts to mitigate these costs could lead to even greater costs from "government failure", there is sometimes a choice between imperfect outcomes, i.e. imperfect market outcomes with or without government interventions . But either way, if a market failure exists the outcome is not Pareto efficient . Most mainstream economists believe that there are circumstances (like building codes or endangered species) in which it is possible for government or other organizations to improve the inefficient market outcome . Several heterodox schools of thought disagree with this as a matter of principle . </P> <P> An ecological market failure exists when human activity in a market economy is exhausting critical non-renewable resources, disrupting fragile ecosystems services, or overloading biospheric waste absorption capacities . In none of these cases does the criterion of Pareto efficiency obtain . </P> <P> Different economists have different views about what events are the sources of market failure . Mainstream economic analysis widely accepts a market failure (relative to Pareto efficiency) can occur for three main reasons: if the market is "monopolised" or a small group of businesses hold significant market power, if production of the good or service results in an externality, or if the good or service is a "public good". </P> <P> Agents in a market can gain market power, allowing them to block other mutually beneficial gains from trade from occurring . This can lead to inefficiency due to imperfect competition, which can take many different forms, such as monopolies, monopsonies, or monopolistic competition, if the agent does not implement perfect price discrimination . </P>

What are the causes of market failure in economics