Which one of the following scenarios describes a primary source of market failure rather than the normal operation of the price mechanism or an instance of government failure?
A government-mandated price floor on agricultural goods leads to chronic surpluses and expensive storage costs paid by taxpayers.
A rise in the market price of organic fertilizer encourages agricultural firms to allocate more land to chemical-free farming techniques.
Private providers underproduce vocational training programs because individual workers underestimate the long-term career benefits of acquiring new skills.
A domestic technology firm experiences a decrease in long-run average costs as the local software engineering cluster expands.
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.