The free market equilibrium price for a merit good is £120 per unit. Currently, there is no government intervention in this market. The government is most likely to correct the market failure associated with this merit good if it
imposes a minimum price of above £120 per unit.
provides a subsidy to consumers or producers of the good.
levies an indirect tax on the consumption of the good.
sets a maximum price of above £120 per unit.
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.