Market failure occurs when A. the market system fails to allocate resources to each individual according to their needs. B. the unrestrained market economy leads to too few or too many resources going to a specific economic activity. C. the market system fails to allocate resources to each individual according to their abilities. D. the market system fails to allocate an equal share of resources to all individuals.

Answer: B. the unrestrained market economy leads to too few or too many resources going to a specific economic activity.

Explanation: The production, distribution and allocation of goods should be based on the forces of demand and supply, such that production and distribution of certain goods and services rise due to increased consumption or demand and the opposite is witnessed once demand declines. These model of demand and supply allows equilibrium to be struck characterizes an effective market protocol.

However, in circumstances where the production, distribution and allocation of goods or resources fail to align with the needs or demand of the free market, Market failure has been encountered.

B. the unrestrained market economy leads to too few or too many resources going to a specific economic activity.

Explanation:

The economic situation whereby the distribution of goods and services in the free market becomes inefficient is known as Market Failure. It is the phenomenon in which price system fails to account for all the costs and benefits necessary to provide and consume a good or service. It occurs when the unrestrained market economy leads to too few or too many resources going to a specific economic activity. It also occurs when there is a state of disequilibrium in the market due to market distortion.