What do we need governments for? This is an important and interesting question to ponder about. From the point of view of economics, a crucial reason to have a government is for the government to fix market failure(s). there is three types of market failure: (a) coordination failure in the context of provision of public goods, (b) tragedy of the commons, and (c) externalities. For each type of market failure, explain what it is and provide a real life example.