A brickworks produces smoke that affects nearby residents. The government charges the brickworks a tax on every batch of bricks it makes.
How does the tax help to bring brick output closer to the quantity that is best for society?
Demand for bricks shifts to the right, so the price rises and more bricks are made.
Demand for bricks shifts to the left, so the price falls and fewer bricks are made.
Supply of bricks shifts to the left, so the price rises and fewer bricks are made.
Supply of bricks shifts to the right, so the price falls and more bricks are made.
83 exam-style questions on AQA GCSE Economics 1.6 Market failure, covering 1.6.1a Market failure as misallocation of resources, 1.6.1b Government intervention, 1.6.2a Defining externalities, and 1.6.2b Positive and negative externalities. Each one has a worked solution and a mark scheme showing where the marks go.