Essay questions on market failure
Case study: $92BN PER YEAR NEEDED TO IMPROVE SUB-SAHARAN AFRICA'S ROAD AND
Explain why public goods are an example of market failure.
Case study: $92BN PER YEAR NEEDED TO IMPROVE SUB-SAHARAN AFRICA'S ROAD AND
Discuss whether government attempts to correct market failure do more harm than good.
Data response questions on market failure
Using the data, discuss whether compulsory food labels are likely to correct market failure in Jamaica in this case.
(i) On average, a typical household wheelie bin contains 65 kg of waste. Using the April 2024 standard tax rate, calculate how much will be paid in Landfill Tax if all of this waste goes to landfill. (ii) Using the data, outline two external costs that result from household waste going to landfill.
Using a demand and supply diagram, explain how a sharp rise in the Landfill Tax will cause prices to rise in industries that send a lot of waste to landfill.
Using an externalities diagram and the data, evaluate the extent to which the Landfill Tax could correct the market failure caused by waste being sent to landfill.
Using a demand and supply diagram, explain why reducing the number of permits in the market for carbon from 1365 million to 936 million allowances/permits will in theory mean that industries "bring their emissions down at the rate needed to reach the UK's goals for greenhouse gas emissions by 2050" (lines 44–46).
Case study: Cross-railing
Using a diagram, outline the likely impact of new rail lines on the wages of workers in London.
Case study: Cross-railing
Evaluate whether increasing infrastructure is better than increased use of road pricing (line 13) to reduce market failure.
Case study: Corbynomics
Using the data, describe how the proposed new national investment bank and transformation funds could (i) decrease negative externalities (ii) increase positive externalities
Using an example, show what is meant by an external cost in this case.
The diagram below shows the private and social costs and benefits of alcohol production and consumption. Outline how a minimum price could correct the market failure present in this case. Adapt the diagram as part of your answer.
Case study: The road goes ever on...
Using a demand and supply diagram, show how roads being 'free at the point of use' (line 23) causes road congestion.
Case study: The road goes ever on...
Using examples from the data, explain how road congestion creates market failure.
Case study: The road goes ever on...
With reference to the data, evaluate the use of road pricing as a means of solving the problem of road congestion in the UK.
Case study: Rise of Palm Oil
Explain a possible external benefit of agricultural production.
Case study: A PLASTIC WORLD
Outline how an absence of property rights is a type of market failure.
Case study: A PLASTIC WORLD
Using the data, consider the extent to which information asymmetry existed between producers and consumers of personal care products containing microbeads before the 2018 ban.
Case study: A PLASTIC WORLD
(i) Using the data, outline how the use of plastic can create external costs. (ii) To what extent are the steps taken by the UK Government to reduce plastic pollution likely to solve the market failure?
With reference to the data above, consider how effective the UK Government's spending on flood defences is in correcting market failure.
Using a diagram and with reference to the context, discuss the extent to which taxes on sugary fizzy drinks are likely to be effective in correcting market failure.
Case study: The Codfathers – a fishy business
(i) Define market failure. (ii) With reference to Figures 1 and 2 and appropriate economic theory, explain why regulation is likely to be necessary in the fishing industry to prevent market failure.
Case study: The Codfathers – a fishy business
Using diagrams, discuss whether the policies that the UK is considering (lines 44 to 46) will be effective in preventing market failure in the plastics industry.
Using calculations to support your answer, discuss which of the two policies suggested would be most likely to correct the market failures associated with the smoking of conventional cigarettes.
Case study: Zambian economy boosted by rising copper prices
Using appropriate economic analysis, discuss whether introducing more environmental regulations would be a good way of correcting the market failures described in the copper industry.
Define what is meant by market failure.
Describe how market failure might occur in labour markets as a result of: (i) external benefits. (ii) information asymmetry.
Discuss the extent to which websites such as raileasy.co.uk might help to correct market failure in this case.
Case study: WAR ON SMOKERS CONTINUES
Explain what is meant by 'all figures at 2010 prices'. (Figure 3)
Case study: WAR ON SMOKERS CONTINUES
Using a demand and supply diagram explain how the revenue of cigarette manufacturers could be affected by the introduction of plain packaging for their brands.
Case study: WAR ON SMOKERS CONTINUES
How does the growing of both tobacco and the smoking of cigarettes produce external costs?
Short answer questions on market failure
The diagram below illustrates the costs and benefits involved in the provision of a merit good such as healthcare services. Using the diagram, discuss whether societies should provide healthcare services free at the point of use (like the National Health Service in the UK).
Multiple choice questions
- A-level Component 1, June 2023, Q5
In a market for a merit good, a government decides to correct the market failure by creating a subsidy for the producers. Which of the following diagrams shows both the initial welfare loss and how the market failure will be corrected?…
- A-level Component 1, June 2022, Q3
The excessive consumption of junk food imposes external costs on society, resulting in market failure. Which of the following diagrams best illustrates this economic problem? (Options A to E are diagrams: see the question paper.)
- A-level Component 1, October 2021, Q2
An absence of private property rights results in a market failure which is linked to a concept entitled 'the tragedy of the commons'. Which pair of characteristics in the table below would cause this market failure?
- A-level Component 1, October 2021, Q18
Study the chart on the decline of elephant populations in Africa in the question paper (about 27 million in 1800, 10 million in 1900, falling to under 0.5 million by 2000). The most likely economic explanation for the trend shown in the…
- A-level Component 1, October 2021, Q19
The diagram below shows a market in which an externality is present. Supply is MPC=MSC; the MSB curve lies below the MPB curve, so equilibrium output (Qeq) is above the socially optimal level of output (Qsoc). The most likely explanation…
- A-level Component 1, June 2019, Q1
A free fireworks display in a park can best be described as a:
- A-level Component 1, June 2019, Q3
A demerit good would be most likely to have:
- A-level Component 1, June 2017, Q18
The diagram below shows the market for a good with external benefits in consumption. Supply is S=MPC=MSC, demand is D=MPB and the MSB curve lies above it. Which one of the following can be deduced from the diagram? (The diagram is in the…
