1.5 Market failure and government intervention

Question 1

Define a private cost

Question 2

Define a private benefit

Question 3

Define an external cost

Question 4

Define an external benefit

Question 5

Define a social cost and give its formula

Question 6

Define a social benefit and give its formula

Question 7

Define a positive externality

Question 8

Define a negative externality

Question 9

Explain 3 strengths of the market economy

Question 10

Explain 3 weaknesses of the market economy

Question 11

How does Govt. intervention aim to address market failure

Question 12

Define regulation

Question 13

Explain the “polluter pays principle?”

Question 14

Define legislation

Question 15

State 3 advantages of legislation and regulation

Question 16

State 2 disadvantages of legislation and regulation

Question 17

Define indirect taxes and give 2 examples

Question 18

Define an incentive

Question 19

Explain the indirect taxation graph

Answer 19

Shifts supply inwards and upwards, price increases, quantity demanded falls

Question 20

Define a subsidy

Question 21

What is a voluntary agreement and briefly outline its merits and drawbacks?

Question 22

What are some less common methods of correcting market failure?

Answer 22

• Education
• Free provision
• Advertising/ PSAs

Question 23

What is Government failure?

Question 24

What may occur as a consequence of subsidies in a market?

Question 25

What are some unintended consequences of government intervention?

Question 26

Detail 2 recent examples of market failure