Cambridge International (CAIE) · 8 Government microeconomic intervention (A Level) · 8.1 Government policies to achieve efficient resource allocation and correct market failure

Cambridge International (CAIE) Economics past paper questions: Government policies to achieve efficient resource allocation and correct market failure

Every Cambridge International (CAIE) question on Government policies to achieve efficient resource allocation and correct market failure from 2023 to 2025: 7 essays, 1 data response question and 12 multiple choice questions. It covers 7.4 Private costs and benefits, externalities and social costs and benefits, 7.3 Efficiency and market failure and 11.6 Globalisation. Each question links to its paper, mark scheme and examiner report.

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Subtopics7.4 Private costs and benefits, externalities and social costs and benefits 47.3 Efficiency and market failure 111.6 Globalisation 1

Essay questions on government policies to achieve efficient resource allocation and correct market failure

A-level Paper 4, November 2025, Q2OptionalEvaluate20 marks

Traffic congestion is a cause of allocative inefficiency. Evaluate, with the help of diagram(s) two policies that a government may introduce to reduce the problem of allocative inefficiency caused by traffic congestion.

Question paper p.3 Mark scheme p.12 Open in the tool Draw it: negative externality diagram Or: indirect tax diagram

A-level Paper 4, June 2025, Q2OptionalAssess20 marks

Monopolies restrict output to raise prices to exploit consumers. With the help of a diagram, assess the extent to which a government should intervene in monopoly markets.

Question paper p.4 Mark scheme p.11 Open in the tool Draw it: monopoly diagram

A-level Paper 4, November 2024, Q3OptionalEvaluate20 marks

Privatisation is often required by the International Monetary Fund (IMF) and the World Bank before they are prepared to offer support to countries requiring loans, grants, debt relief and debt cancellation programs. Evaluate the view that privatisation will always improve the allocation of resources in a country.

Question paper p.4 Mark scheme p.12 Open in the tool

A-level Paper 4, June 2024, Q2OptionalEvaluate20 marks

Market failure exists in all economies. Evaluate, with the aid of a diagram(s), the meaning of market failure and two policies a government may use to correct market failure.

Question paper p.3 Mark scheme p.9 Open in the tool Draw it: negative externality diagram Or: indirect tax diagram

A-level Paper 4, March 2024, Q2OptionalAssess20 marks

With the help of a diagram, assess the effectiveness of a government’s intervention in the price mechanism to address the causes of climate change.

Question paper p.3 Mark scheme p.10 Open in the tool Draw it: negative externality diagram Or: indirect tax diagram

A-level Paper 4, June 2023, Q2OptionalEvaluate20 marks

The increased use of electric vehicles (EVs) is encouraged as part of governments’ climate change policies because they create fewer negative externalities than diesel and petrol (gas) vehicles. Evaluate, with the help of a diagram(s), two policies that a government may use to encourage the use of EVs.

Question paper p.3 Mark scheme p.10 Examiner report p.24 Open in the tool Draw it: subsidy diagram Or: negative externality diagram

A-level Paper 4, March 2023, Q2OptionalAssess20 marks

The use of air travel leads to market failure caused by negative externalities. With the help of a diagram, assess the extent to which a government can intervene to correct this market failure.

Question paper p.3 Mark scheme p.9 Examiner report p.9 Open in the tool Draw it: negative externality diagram

Data response questions on government policies to achieve efficient resource allocation and correct market failure

Case study: Traffic Control

From the evidence, consider whether the Singapore quota system or the ERP was more effective in solving the problem of traffic congestion.

Question paper p.2 Mark scheme p.8 Examiner report p.25 Open in the tool

Multiple choice questions

A-level Paper 3, November 2025, Q11
A government introduces a maximum price for rice of P2. What is the effect of this?
A-level Paper 3, June 2025, Q8
The marginal social benefit of consuming a drink is less than the marginal private benefit. What would be the best policy to improve resource allocation in this market?
A-level Paper 3, June 2025, Q11
What is not an outcome of the existence of private property rights?
A-level Paper 3, March 2025, Q11
A government introduced a tax on soft drinks containing sugar. It was forecast that the tax would raise £520m per year for the government. However, the tax received was £240m. What is the most likely reason why the tax collected was lower…
A-level Paper 3, November 2024, Q11
What is not a valid comment economists may make regarding the need to subsidise a green energy market that uses solar and wind power?
A-level Paper 3, June 2024, Q11
A government wants to introduce a policy that will reduce the pollution caused by the production of a good. Which policy would not make use of market forces?
A-level Paper 3, June 2024, Q12
The table shows the annual percentage change in the output per worker employed for four nationalised industries before and after privatisation. What can be concluded about the effect of privatisation?
A-level Paper 3, March 2024, Q11
A government wishes to use market forces to remove a negative externality in the consumption of a good. Which policy is likely to be the most effective?
A-level Paper 3, March 2024, Q12
A government decides to replace a private company with its own company to collect household waste. Why could such action be justified?
A-level Paper 3, November 2023, Q14
At present, motorists who drive their cars within area 1 on the map pay a daily congestion charge of $8. Which car journeys would decrease in number if the congestion charge area were extended to include area 2?
A-level Paper 3, June 2023, Q17
A government imposes a maximum price for electricity. Which statement justifying this measure might be considered valid on economic grounds?
A-level Paper 3, March 2023, Q15
A government wishes to reduce the use of cars in cities. Which policy should be used?

Question text is quoted from the question papers, © Cambridge University Press & Assessment (UCLES), for students’ private study. Open the official papers and mark schemes from the links on each question. Examiner insights are written with AI assistance and moderated by Finn.

Essay questions on government policies to achieve efficient resource allocation and correct market failure

Data response questions on government policies to achieve efficient resource allocation and correct market failure

Multiple choice questions

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