A government attempting to reduce industrial sulfur dioxide emissions through a tradeable pollution permit scheme may fail to achieve this objective if:
firms must legally acquire permits in proportion to their total sulfur dioxide output.
firms that successfully cut emissions are permitted to trade their spare allowances on an open market.
the overall limit on the total number of permits issued is set too high to restrict current emission levels.
firms invest in cleaner, modern capital equipment to minimise their requirement for permits.
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.