In which one of the following situations is the example of government intervention most appropriate?
| Type of market failure | Consequence of market failure | Example of intervention | |
|---|---|---|---|
| A | Positive externality of consumption | Under-consumption of resources | Imposition of an indirect tax |
| B | Demerit goods | Over-consumption by consumers | Provision of a government subsidy |
| C | Negative externality of production | Over-production and welfare loss | Imposition of a pollution tax |
| D | Information failure | Misallocation of resources | Setting a maximum price limit |
A
B
C
D
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.