Market failures occur when the allocation of goods and services by a free market is not efficient. This can happen for various reasons, such as the presence of externalities, where the actions of individuals or businesses affect others who are not directly involved in a transaction. For example, pollution from a factory can harm the environment and public health, leading to costs that are not reflected in the market price. Another cause of market failure is the existence of public goods, which are non-excludable and non-rivalrous, meaning that one person's use does not reduce availability for others. Examples of public goods include national defense and public parks. In such cases, the market may underproduce these goods, as businesses cannot easily charge consumers directly for their use.