Pack 14

Question 1

Define the term ‘government failure’

Answer 1

When government intervention leads to an inefficient allocation of resources and a net welfare loss.

Question 2

Explain why government failure may occur in the market for cigarettes

Answer 2

Government bans cigarettes in public spaces so more people smoke outside and litter more. Surge in demand for open air patio heaters to keep smokers warm which contributes massively to CO2 emissions (typical pub patio heater emits 25% more tonnes of CO2 than an avg car).

Question 3

Explain why government provision of healthcare may be government failure

Answer 3

Government wasted a total of £15 billion on unused covid vaccines, tests and personal protective equipment such as masks. Info gap as gov didn’t understand how much resources were actually needed and lost lots of money.

Question 4

What are the 4 causes of government failure

Answer 4

-Distortion of price signals
-Unintended consequences
-Excessive admin costs
-Information gaps