Which of the following scenarios is most likely to be classified as a cause of government failure rather than market failure?
A state-funded subsidy for electric vehicles that leads to administrative and distortionary costs that exceed the environmental benefits
Under-investment in research and development for renewable energy because private firms cannot fully appropriate the positive externalities
The over-extraction of water from a shared aquifer by commercial farms due to the absence of defined property rights
Consumers continuing to purchase high-emission diesel vehicles because they are unaware of the long-term respiratory health costs
378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.