WJEC · Microeconomics · Market failure
WJEC Economics past paper questions: Market failure
Every WJEC question on Market failure from 2016 to 2025: 12 data response questions and 7 multiple choice questions. It covers Aggregate demand, Government intervention in markets, The economic problem and resource allocation, Demand, supply and elasticity and Poverty and inequality. Each question links to its paper, mark scheme and examiner report.
Data response questions on market failure
Case study: Heating Up
Case study: REDUCING THE THREAT OF CLIMATE CHANGE
Examiner insight
- What to cover
- Separate private, external and social costs and benefits, then list the external costs of wind power (visual and noise effects, habitat and bird impacts, intermittency) and the external benefits (lower carbon emissions, energy security, less air pollution).
- Watch out
- Writing about the private costs and benefits of wind power scored no marks. And identifying an external effect is not enough: explain how it reaches a third party, for example carbon reduction to food and water security or lower flood risk for homeowners.
Case study: REDUCING THE THREAT OF CLIMATE CHANGE
Examiner insight
- What to cover
- Define market failure, identify carbon emissions as a negative externality in production, and show how a tax equal to the external cost internalises it and moves output to the social optimum.
- Watch out
- Many candidates drew a negative consumption externality diagram instead of a production one. Practise telling the two apart, and label the axes and curves.
Examiner insight
- What to cover
- Pick two factors the MPC actually uses, such as the CPI inflation rate and forecast, GDP growth, unemployment, wage growth or confidence surveys. Explain how each feeds into a rate decision. Then, for each, judge how useful it is.
- Watch out
- This is not a question about the effects of changing interest rates. Candidates who wrote about the impact of a rate change scored at most half marks.
Case study: SIN CITY
Examiner insight
- What to cover
- Define external costs, then give the third party costs of alcohol and sugary drinks: strain on healthcare, lost productivity, crime and disorder. Make the third party link explicit, for example by tying healthcare strain to higher taxes or to the opportunity cost of other public spending.
- Watch out
- Long passages on the private costs of drinking and sugar do not answer the question. Keep the focus on costs falling on third parties.
Case study: SALMON FARMING IN SCOTLAND
Examiner insight
- What to cover
- Use market failure theory explicitly: negative externalities in production from salmon farming (pollution, disease, wild stock damage), absence of property rights and the tragedy of the commons in wild fisheries, and any information failure.
- Watch out
- Two traps. An answer that reads like a newspaper piece on the good and bad of salmon farming, with no market failure theory, is capped at Band 1 for analysis. And the 12,000 jobs in the industry are private benefits, not external ones. The external benefit argument must run through the multiplier and jobs outside the industry.
Case study: A BRIDGE TOO FAR!
Case study: A BRIDGE TOO FAR!
Examiner insight
- What to cover
- Define a public good with the technical terms: non rival, non excludable, non diminishable. Then test roads against each characteristic in turn, using the data. Ordinary roads are close to non excludable, tolled roads and congested roads are not.
- Watch out
- A public good is not the same as a publicly funded good. Candidates who confused the two scored very few marks.
Case study: CHANCELLOR UNDER PRESSURE
Examiner insight
- What to cover
- Frame it first as a micro market failure: merit goods are under consumed because of information failure and positive externalities. Then add the macro side, where free provision raises human capital and shifts LRAS right.
- Watch out
- A purely macro answer runs out of material and repeats itself. Endless analysis of education and health shifting LRAS earned limited credit. Keep to economics, not morality or ethics.
Case study: PLASTIC BAGS: TO CHARGE OR NOT TO CHARGE?
Examiner insight
- What to cover
- Identify the negative externalities of plastic bag consumption from the text (litter, marine damage, landfill), then take the argument up to the socially optimum level of output, with MSC, MSB and the overconsumption at the free market quantity.
- Watch out
- Application and definitions were done well by most. The marks were separated by the diagram and by the higher order analysis in terms of the socially optimum level and MSB against MSC, so use that language.
Case study: ALL THAT IS GOLD DOES NOT GLITTER
Examiner insight
- What to cover
- No evaluation marks here, so it is pure technical explanation. Define external and social costs, use the gold mining hooks in the data (pollution, mercury, deforestation, health), and show output above the social optimum.
- Watch out
- Full marks needed accurate technical language and a robust diagram, plus AO2 marks for keeping the answer about gold rather than pollution in general. Do not spend time evaluating, there are no marks for it.
Multiple choice questions
- AS Unit 1, June 2024, Q13
A £6.2m funding package for 2020–2022 was provided by the Welsh Government for the National Library of Wales and National Museum Wales. One reason why the Welsh Government provides museums is that:
- AS Unit 1, June 2023, Q1
Rational consumers seek to maximise their:
- AS Unit 1, June 2023, Q11
In 2019, almost 38% of all US cinema ticket sales were to see Disney movies. When Disney negotiated the rights to show Star Wars: The Last Jedi with cinemas, it insisted the cinemas give them 65% of ticket revenue from the film, a new high…
- AS Unit 1, June 2019, Q4
The diagram below shows a product that has negative externalities in both consumption and production. What is the socially efficient level of output? MSC MSC - Marginal Social Cost Price MPC MSB - Marginal Social Benefit MPC - Marginal…
- AS Unit 1, June 2019, Q14
Jon is buying a health insurance policy from a provider. He does not tell them about his smoking habit and, as a result, he is able to buy a health insurance policy at a much lower price than if he had told them. This is an example of…
- AS Unit 1, June 2017, Q15
"Once a public good is produced, anyone can enjoy it, even those who did not pay for its consumption." This statement describes which economic concept?
- AS Unit 1, June 2016, Q10
The following diagram shows the market for a merit good. Which area represents the welfare loss which would occur if it was supplied in a free market economy? PRICE H S = MPC = MSC I K N L P MSB J D = MPB Quantity M R
Question text is quoted from the question papers, © WJEC CBAC Ltd, 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.