102 MARKET FAILURE AND EXTERNALITIES Market failure he situation that arises when the actions of some people adversely and significantly affect others in one or more ways The inability of some unregulated markets to allocate resources efficiently10.2 MARKET FAILURE AND EXTERNALITIES ▪ Market failure ▪ the situation that arises when the actions of some people adversely and significantly affect others in one or more ways. ▪ The inability of some unregulated markets to allocate resources efficiently