Government intervention in a free-market economy is most likely to achieve a net gain in economic welfare if
it corrects a market failure where the social cost of production exceeds the private cost.
it encourages the consumption of goods with significant negative externalities.
the price elasticity of demand for all subsidized merit goods is perfectly inelastic.
it results in a shift from the provision of public goods to private goods.
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.