Final answer:
A market with cost or benefit not internalized, unclear property rights, and high transaction costs signifies a market failure where the allocation of resources is inefficient due to externalities.
Step-by-step explanation:
When a market has a cost or benefit not internalized, along with unclear property rights, and high transaction costs, this usually indicates a case of market failure. Market failure occurs when the market on its own does not allocate resources efficiently or in a way that balances social costs and benefits. This situation often involves externalities, which are either positive or negative consequences of a market activity that affect third parties outside the transaction.
Externalities often require interventions to internalize these costs or benefits that the market has failed to incorporate. For example, imposing taxes or subsidies can help adjust the private cost or benefit to reflect the true social cost or benefit. High transaction costs and unclear property rights tend to exacerbate the problem, making it difficult for markets to function properly and for resources to move freely between markets. Programs like marketable permit programs could be introduced to allow firms to trade permits for emissions or other regulated activities, hence providing a financial incentive to reduce negative externalities.