Government intervention designed to correct a market failure can lead to a net welfare loss (government failure) because
the administration costs of implementing and enforcing the policy may exceed the social benefits gained.
public goods can never be supplied by the private sector even when subsidised by the state.
setting a maximum price to make a merit good more affordable always leads to an excess supply of that good.
the social optimum level of output is theoretically impossible to identify when external costs exist.
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.