Answer: Ineffectiveness of competitive markets.
Step-by-step explanation: Externalities refers to the forces under which an unrelated party to the subject gets affected from the decision of some other party.
In the competitive industry, the prices are determined by the market forces of demand and supply due to large number of participants. This cause inefficiencies as the prices are not fixed and keeps changing as these forces are dynamic in nature.
Thus, Externality forces comes into play causing ineffective allocation of resources.