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1.8 The market mechanism, market failure and government intervention in markets

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Question 40

Extract B: The Environmental Cost of Industrial Livestock Farming

Globally, over 80 billion land animals are raised and slaughtered annually for food, with a rapidly growing percentage reared in high-density industrial 'mega-farms'. To maximize yields and maintain high throughput, operators heavily utilize synthetic feeds and antibiotic regimens.

Environmental advocates highlight that these intensive confinement facilities generate vast quantities of untreated animal manure, which is stored in open lagoons. This slurry frequently leaks into local waterways, causing toxic algal blooms that destroy aquatic ecosystems and contaminate municipal drinking water. This imposes severe external cleanup and healthcare costs on local communities, even though it allows agricultural firms to keep their private operating costs low and maximize short-term corporate profits.

Transitioning to sustainable, pasture-based models would require major structural reforms in agricultural supply chains. While production yields might initially drop, local river regeneration, improved public health, and lower water-purification costs would yield huge long-term social benefits. Although some nations are considering a carbon-and-nitrogen tax on industrial livestock production by 2030, the lobbying power of major agribusinesses remains a significant barrier to policy implementation.

Extract B states that: 'intensive confinement facilities generate vast quantities of untreated animal manure... imposing severe external cleanup and healthcare costs on local communities...'

With the help of a diagram, explain how the intensive production of meat in mega-farms may result in market failure.

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Markscheme

1.8 The market mechanism, market failure and government intervention in markets Questions

  1. A Level
  2. /Economics
  3. /1.8 The market mechanism, market failure and government intervention in markets

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.

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