In the context of marginal analysis, which of the following scenarios best illustrates the concept of market failure that may require government intervention for achieving social optimality?

Marginal analysis helps us understand how decisions are made by comparing the additional benefits and costs of an action. Market failure occurs when the market does not allocate resources efficiently, leading to outcomes that are not socially optimal. For example, consider a factory that pollutes a river while producing goods. The factory's owners may only focus on their profits, ignoring the negative impact on the environment and the health of nearby residents. In this case, government intervention, like regulations or taxes, may be needed to reduce pollution and ensure that the costs of production reflect the social costs, helping to achieve a more balanced outcome for everyone involved.