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

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Question 46

A city council is analyzing two transport-related issues within its region:

I. Private operators do not provide any bus services to remote rural villages because they cannot charge a price high enough to cover their operating costs, leading to a total absence of public transport in those areas.

II. Private vehicle use in the city center is high, causing severe air pollution and congestion because motorists do not pay for the external costs they impose on other citizens.

Which of the following correctly classifies the type of market failure occurring in issues I and II?

A

Issue I is partial market failure; Issue II is complete market failure.

B

Issue I is complete market failure; Issue II is partial market failure.

C

Issue I is government failure; Issue II is partial market failure.

D

Issue I is complete market failure; Issue II is government failure.

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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