Which combination of market failure, real-world example, and policy intervention in the table below is most likely to be consistent with correcting the identified market failure?
| Market Failure Category | Real-World Example | Policy Mechanism to Correct Failure | |
|---|---|---|---|
| A | Common pool resource depletion | Overfishing in coastal waters | Setting a maximum price on commercial fish sales to limit quantity demanded |
| B | Negative production externality | Toxic chemical discharge from a paper mill | An indirect tax equal to the marginal external cost (MECMECMEC) to internalise the externality |
| C | Positive consumption externality | Low enrolment in adult literacy programmes | Setting a minimum price on tuition fees to encourage providers to expand supply |
| D | Public good | Excess consumption of sugary beverages | Allocation of tradeable pollution permits to beverage manufacturing plants |
Row A: Common pool resource depletion | Overfishing in coastal waters | Setting a maximum price on commercial fish sales
Row B: Negative production externality | Toxic chemical discharge from a paper mill | An indirect tax equal to the marginal external cost (MECMECMEC)
Row C: Positive consumption externality | Low enrolment in adult literacy programmes | Setting a minimum price on tuition fees
Row D: Public good | Excess consumption of sugary beverages | Allocation of tradeable pollution permits
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.