A government decides that single-use plastic bottles are demerit goods and introduces a corrective tax on their manufacture. It can be concluded that this policy decision:
is guaranteed to eliminate the associated market failure without causing government failure.
does not involve an economic opportunity cost because the tax generates positive government revenue.
is based on a normative judgement.
means that single-use plastic bottles are defined as a pure public bad.
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.