What is a common example of market failure that may require government intervention?

A common example of market failure is when there are externalities, which are costs or benefits that affect people who did not choose to be involved in a transaction. For instance, if a factory pollutes the air while producing goods, the nearby community suffers from health problems and reduced quality of life, even though they are not part of the factory's business. This situation shows that the market does not account for these negative effects, leading to overproduction of the goods and harming society. To fix this, the government might step in by creating regulations to limit pollution or by taxing the factory to make it pay for the harm it causes. This way, the factory will consider the community's well-being, leading to a more balanced and efficient market outcome.