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1.8 The market mechanism, market failure and government intervention in markets

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Question 38

The free market equilibrium price of a merit good is £120 per unit. Currently, the government does not intervene in this market. The government is most likely to correct the market failure associated with this merit good if it

A

imposes a maximum price of £130 per unit.

B

sets a minimum price of £120 per unit.

C

imposes an indirect tax on the producer.

D

provides a subsidy for the good.

Markscheme

1.8 The market mechanism, market failure and government intervention in markets Questions

  1. A Level
  2. /Economics
  3. /1.8 The market mechanism, market failure and government intervention in markets

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.

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