Which of the following situations is the most precise illustration of a complete market failure (resulting in a missing market), as opposed to a partial market failure?
A chemical plant discharging toxic waste into a local river, causing a degradation of water quality for downstream fisheries without compensating them.
An agricultural cooperative being unable to establish a commercially viable market for regional flood-mitigation drainage basins due to the free-rider problem.
A private health insurance provider raising premiums to a level where only high-risk individuals purchase policies, leading to a thin market.
A dominant telecommunications firm setting prices significantly above marginal cost, leading to under-consumption of high-speed broadband services.
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.