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

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Question 14

In a free market economy, the price mechanism allocates scarce resources by

A

adjusting relative prices to signal changes in consumer preferences and reallocate factors of production.

B

establishing price ceilings to prevent external costs from exceeding private benefits.

C

ensuring that public goods are provided in sufficient quantities to satisfy society's needs.

D

lowering prices to ration demand when a shortage of a good occurs in the market.

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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