A government implements a rapid transition to a green economy, causing coal-fired power stations in northern regions to close while new wind-turbine manufacturing hubs emerge in southern coastal regions. If the labour force possesses high levels of occupational and geographical immobility, this structural shift is most likely to result in market failure because
the private costs of retraining and geographical relocation exceed the social benefits, leading to an over-allocation of resources to the wind-turbine sector.
resource misallocation occurs as persistent structural unemployment coexists with vacant positions, causing the economy to operate inside its production possibility frontier.
retraining programs designed to resolve the occupational skills gap are classified as pure public goods, making private-sector provision impossible due to the free-rider problem.
the resulting regional wage disparities prevent the central bank from utilizing monetary policy to correct supply-side labour market imperfections.
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.