Government policies to achieve efficient resource allocation and correct market failure
8.1What the syllabus asks of you
- application and effectiveness of measures to tackle different forms of market failure: specific and ad valorem indirect taxes
- application and effectiveness of measures to tackle different forms of market failure: subsidies
- application and effectiveness of measures to tackle different forms of market failure: price controls
- application and effectiveness of measures to tackle different forms of market failure: production quotas
- application and effectiveness of measures to tackle different forms of market failure: prohibitions and licences
- application and effectiveness of measures to tackle different forms of market failure: regulation and deregulation
- application and effectiveness of measures to tackle different forms of market failure: direct provision
- application and effectiveness of measures to tackle different forms of market failure: pollution permits
- application and effectiveness of measures to tackle different forms of market failure: property rights
- application and effectiveness of measures to tackle different forms of market failure: nationalisation and privatisation
- application and effectiveness of measures to tackle different forms of market failure: provision of information
- application and effectiveness of measures to tackle different forms of market failure: behavioural insights and ‘nudge’ theory
- government failure in microeconomic intervention: definition of government failure
- government failure in microeconomic intervention: causes of government failure
- government failure in microeconomic intervention: consequences of government failure
Drill this topic
Every question on Government policies to achieve efficient resource allocation and correct market failure, untimed, marked as you go.
Make a worksheet
Choose the years and how many questions, then print it with the answers on separate pages.
56 questions
1May / June 2026 · Paper 31 · Q11Show mark scheme →
Aa law requiring all individuals to be vaccinated
Ba reduction in income tax for all vaccinated workers
Ca subsidy to reduce the price of vaccinations
Dadvertisements showing celebrities being vaccinated
Mark scheme
2May / June 2026 · Paper 32 · Q10Show mark scheme →
AIt allows the possibility of a claim for compensation to those harmed.
BIt always makes the polluter pay for pollution caused.
CIt results in better monitoring by the government of the damage from pollution.
DIt will eliminate pollution completely.
Mark scheme
3May / June 2026 · Paper 33 · Q11Show mark scheme →
Aa law requiring all individuals to be vaccinated
Ba reduction in income tax for all vaccinated workers
Ca subsidy to reduce the price of vaccinations
Dadvertisements showing celebrities being vaccinated
Mark scheme
4May / June 2026 · Paper 34 · Q8Show mark scheme →
Aa lack of information
Bthe economy is in recession
Cpolitical pressures
Dunintended consequences
Mark scheme
5Oct / Nov 2025 · Paper 31 · Q11Show mark scheme →
Ainsisting that all fish caught are sold to local people
Bincreasing the licence fees for new boats
Cdistributing leaflets about the need to safeguard fish stocks
Drestricting the areas in which boats can fish
Mark scheme
6Oct / Nov 2025 · Paper 31 · Q13Show mark scheme →
Afirms cannot sell any surplus permits
Bno monitoring of firms’ emissions is required
Cpollution levels can be reduced to zero
Dthe reduction in the level of pollution is more predictable
Mark scheme
7Oct / Nov 2025 · Paper 33 · Q12Show mark scheme →
Aprice elasticity of demand for cigarettes > 1; government spending on law enforcement high
Bprice elasticity of demand for cigarettes > 1; government spending on law enforcement low
Cprice elasticity of demand for cigarettes < 1; government spending on law enforcement high
Dprice elasticity of demand for cigarettes < 1; government spending on law enforcement low
Mark scheme
8Oct / Nov 2025 · Paper 34 · Q8Show mark scheme →
Ahigher levels of competition
Bhigher costs passed on in the form of higher prices
Copportunity for government regulation
Dpotential for a private monopoly
Mark scheme
9May / June 2025 · Paper 31 · Q9Show mark scheme →
AIt allows consumers to determine the optimum pollution level.
BIt can provide rewards for firms that reduce pollution.
CIt enables the government to raise revenue from the resale of permits.
DIt uses the market system with no administrative costs.
Mark scheme
10May / June 2025 · Paper 31 · Q10Show mark scheme →
AIt occurred because the government's opportunity costs were not considered.
BIt occurred because the wishes of the majority of citizens were ignored.
CIt occurred because the result was unintended.
DIt occurred from over-reliance on the market system.
Mark scheme
11May / June 2025 · Paper 31 · Q13Show mark scheme →
Aemploying an extensive administration to ensure detection of evasion
Bimposing heavy penalties on those who do evade tax
Cproviding information to taxpayers about the undesirable effects of tax evasion
Drequiring employers to inform the tax authorities of workers' pay
Mark scheme
12May / June 2025 · Paper 32 · Q9Show mark scheme →
Adecreased consumption of cigarettes by smokers
Bdecreased levels of passive cigarette smoking by non-smokers
Cincreased litter from used cigarettes outside offices and shops
Dincreased sales of cigarette substitutes like nicotine patches and gum
Mark scheme
13May / June 2025 · Paper 32 · Q11Show mark scheme →
AThey encourage private owners to conserve property when its value is expected to rise.
BThey give private owners the incentive to manage their property carefully.
CThey make private owners accountable for damage to others from property misuse.
DThey prevent private owners gaining from using resources to benefit others.
Mark scheme
14May / June 2025 · Paper 33 · Q9Show mark scheme →
AIt allows consumers to determine the optimum pollution level.
BIt can provide rewards for firms that reduce pollution.
CIt enables the government to raise revenue from the resale of permits.
DIt uses the market system with no administrative costs.
Mark scheme
15May / June 2025 · Paper 33 · Q10Show mark scheme →
AIt occurred because the government's opportunity costs were not considered.
BIt occurred because the wishes of the majority of citizens were ignored.
CIt occurred because the result was unintended.
DIt occurred from over-reliance on the market system.
Mark scheme
16May / June 2025 · Paper 33 · Q13Show mark scheme →
Aemploying an extensive administration to ensure detection of evasion
Bimposing heavy penalties on those who do evade tax
Cproviding information to taxpayers about the undesirable effects of tax evasion
Drequiring employers to inform the tax authorities of workers' pay
Mark scheme
17May / June 2025 · Paper 34 · Q8Show mark scheme →
Acompelling direct tax deduction by employers
Bmaking random inspections of individual tax records
Cproviding information on how the tax is spent by the government
Dusing penalties such as fines and imprisonment for tax avoidance
Mark scheme
18Feb / March 2025 · Paper 32 · Q8Show mark scheme →
Adecreased maximum price causing producers to leave the market
Bhigher guaranteed price encouraging suppliers to overproduce
Cincreased minimum wage leading to employers dismissing workers
Dincreased subsidies encouraging the consumption of a socially desirable product
Mark scheme
19Oct / Nov 2024 · Paper 31 · Q11Show mark scheme →
Aa ban on cocaine consumption
Bcompulsory wearing of seatbelts in cars
Clicences for the extraction of water from rivers
Dtaxation of cigarettes
Mark scheme
20May / June 2024 · Paper 31 · Q11Show mark scheme →
Aan incentive payment for firms who reduce the levels of rubbish
Ba tax on the amount of rubbish a firm or household creates
Can advertising campaign about the problems created by rubbish
Dgovernment grants to firms researching how to safely dispose of rubbish
Mark scheme
21May / June 2024 · Paper 31 · Q12Show mark scheme →
Afewer destinations served by trains and buses
Blower fares
Cmore frequent services to all destinations
Dmore people employed in public transport services
Mark scheme
22May / June 2024 · Paper 32 · Q11Show mark scheme →
Aa quota to limit the production of the good
Ba regulation to ban the production of the good
Ca tax on the production of the good
Da tradable pollution permit system for producers of the good
Mark scheme
23May / June 2024 · Paper 32 · Q12Show mark scheme →
AEmployment fell in the railway industry.
BEmployment was unchanged in the telecommunications industry.
COutput was greatest in the electricity supply industry.
DWorkers became less efficient in the shipbuilding industry.
Mark scheme
24May / June 2024 · Paper 33 · Q11Show mark scheme →
Aan incentive payment for firms who reduce the levels of rubbish
Ba tax on the amount of rubbish a firm or household creates
Can advertising campaign about the problems created by rubbish
Dgovernment grants to firms researching how to safely dispose of rubbish
Mark scheme
25May / June 2024 · Paper 33 · Q12Show mark scheme →
Afewer destinations served by trains and buses
Blower fares
Cmore frequent services to all destinations
Dmore people employed in public transport services
Mark scheme
26Feb / March 2024 · Paper 32 · Q12Show mark scheme →
AWaste collection is a public good.
BCosts of waste collection are bound to be lower if paid out of local taxes.
CPrivate companies are always less efficient than government companies.
DPrivate companies might put profits before customer needs.
Mark scheme
27Feb / March 2024 · Paper 32 · Q13Show mark scheme →
AAn indirect tax equal to external costs is imposed on cigarettes and the demand falls.
BLimits are placed on a trade union's restrictions that increase labour mobility.
CPrice controls on bread are removed which allow a free market to operate.
DTariffs are imposed on imported goods which cause the Gini coefficient to increase.
Mark scheme
28Oct / Nov 2023 · Paper 31 · Q11Show mark scheme →
Agovernment intervention leading to a less efficient allocation of resources
Bgovernment intervention leading to a net loss of economic welfare
Cgovernment intervention leading to an increase in consumer surplus
Dgovernment intervention leading to social costs exceeding social benefits
Mark scheme
29Oct / Nov 2023 · Paper 31 · Q19Show mark scheme →
Athe introduction of carbon taxes on pollution
Bthe operation of tradable pollution permits
Cthe provision of government subsidies
Dthe setting of industrial emission standards
Mark scheme
30Oct / Nov 2023 · Paper 33 · Q14Show mark scheme →
Agovernment provision of healthcare
Bprice controls on large firms
Cregulations to limit smoke pollution
Dintroducing import quotas
Mark scheme
31May / June 2023 · Paper 31 · Q13Show mark scheme →
Aa nudge
Ba permit to pollute
Cnationalisation
Dregulation
Mark scheme
32May / June 2023 · Paper 31 · Q17Show mark scheme →
AGovernments may have to make decisions on the basis of out-of-date information.
BGovernments may make decisions that reduce negative externalities.
CThe extent of the market failure may be difficult to judge.
DWhen circumstances change, a government may be unable to respond quickly.
Mark scheme
33May / June 2023 · Paper 33 · Q13Show mark scheme →
Aa nudge
Ba permit to pollute
Cnationalisation
Dregulation
Mark scheme
34May / June 2023 · Paper 33 · Q17Show mark scheme →
AGovernments may have to make decisions on the basis of out-of-date information.
BGovernments may make decisions that reduce negative externalities.
CThe extent of the market failure may be difficult to judge.
DWhen circumstances change, a government may be unable to respond quickly.
Mark scheme
35Oct / Nov 2022 · Paper 12 · Q18Show mark scheme →
Aa single private shareholder acquires complete control of an organisation
Bthe purchase of government bonds by private sector commercial organisations
Cthe purchase of shares in a private company
Dthe transfer of public sector assets to the private sector
Mark scheme
36Oct / Nov 2022 · Paper 13 · Q17Show mark scheme →
ADecisions will no longer be taken with political considerations in mind.
BThe benefits of merit goods will be taken into account in decision-making.
CIts owners would have more incentive to make it operate profitably.
DThere will be greater incentives for managers to introduce modern technology.
Mark scheme
37Oct / Nov 2022 · Paper 31 · Q14Show mark scheme →
Aa firm buys supplies locally rather than from international sources
Ba firm moves from private ownership to state ownership
Ca firm restricts ownership of its shares to citizens of its own country
Da firm switches sales to the domestic market from the international market
Mark scheme
38Oct / Nov 2022 · Paper 31 · Q29Show mark scheme →
Agovernment failure: no; market failure: no; negative externality: yes
Bgovernment failure: no; market failure: yes; negative externality: no
Cgovernment failure: yes; market failure: yes; negative externality: no
Dgovernment failure: yes; market failure: no; negative externality: no
Mark scheme
39Oct / Nov 2022 · Paper 33 · Q13Show mark scheme →
Acheaper fresh fruit and vegetables
Bland clearance reducing wildlife
Clower spending on treating dietary illnesses
Dmore jobs picking fruit and vegetables
Mark scheme
40Oct / Nov 2022 · Paper 33 · Q14Show mark scheme →
Acost of production 320, pollution caused 3
Bcost of production 380, pollution caused 2
Ccost of production 480, pollution caused 1
Dcost of production 700, pollution caused 0
Mark scheme
41May / June 2022 · Paper 31 · Q14Show mark scheme →
Adecrease / decrease
Bdecrease / increase
Cincrease / decrease
Dincrease / increase
Mark scheme
42May / June 2022 · Paper 31 · Q15Show mark scheme →
Aadvertising the benefits of healthy eating
Bincreasing tax on sugary foods
Cintroducing a subsidy for fruit growers
Dsupermarkets putting fruit near cash registers
Mark scheme
43May / June 2022 · Paper 32 · Q13Show mark scheme →
AFines for drivers parking in the area without a permit will internalise the externality.
BThe local government has a monopoly over the issue of parking permits.
CThose suffering from too many parked cars are compensated by the households owning extra cars.
DToo many households own cars so the market in permits is very small.
Mark scheme
44May / June 2022 · Paper 32 · Q14Show mark scheme →
AA chain of coffee shops offers its customers a larger coffee if they bring their own reusable cup.
BA government imposes an indirect tax on the purchase of sugary snacks, to try to reduce childhood obesity.
CA government introduces an opt-out system for organ donation, to try to increase the number of organs donated.
DA restaurant chain introduces smaller-sized main courses on its menu, to try to reduce the volume of food wastage.
Mark scheme
45May / June 2022 · Paper 33 · Q14Show mark scheme →
Adecrease / decrease
Bdecrease / increase
Cincrease / decrease
Dincrease / increase
Mark scheme
46May / June 2022 · Paper 33 · Q15Show mark scheme →
Aadvertising the benefits of healthy eating
Bincreasing tax on sugary foods
Cintroducing a subsidy for fruit growers
Dsupermarkets putting fruit near cash registers
Mark scheme
47Feb / March 2022 · Paper 32 · Q14Show mark scheme →
Aa subsidy on fresh fruit to increase demand
Ba unit tax on unhealthy food to reduce demand
Cbanning all unhealthy food to reduce demand
Dputting fresh fruit at eye level in shops to increase demand
Mark scheme
48Oct / Nov 2021 · Paper 11 · Q14Show mark scheme →
Athe sale on the market of a French state-owned power-generation company
Bthe sale of a privately-owned water company to a German firm
Cthe takeover of a French car manufacturer by the French government
Dthe purchase of a Swedish pharmaceutical producer by a larger American pharmaceutical producer
Mark scheme
49Oct / Nov 2021 · Paper 12 · Q14Show mark scheme →
Asize of public sector: decreases; proportion of industry output entering the market: increases
Bsize of public sector: decreases; proportion of industry output entering the market: no change
Csize of public sector: no change; proportion of industry output entering the market: increases
Dsize of public sector: no change; proportion of industry output entering the market: no change
Mark scheme
50Oct / Nov 2021 · Paper 12 · Q16Show mark scheme →
Ato gain greater efficiency due to more competition
Bto increase merit good provision
Cto increase choice for the consumer
Dto raise more tax revenue
Mark scheme
51Oct / Nov 2021 · Paper 31 · Q14Show mark scheme →
AStandards give more incentive for continued pollution reduction.
BStandards make greater use of the market mechanism.
CTradeable pollution permits are simpler to devise and administer.
DTradeable pollution permits provide a more equitable treatment of firms.
Mark scheme
52May / June 2021 · Paper 11 · Q14Show mark scheme →
Aimmigrant workers being granted permission to work in a country
Bprotecting domestic industries from foreign competition
Cthe government determining which goods should be produced
Dtransfer of a company from private ownership to government control
Mark scheme
53May / June 2021 · Paper 12 · Q14Show mark scheme →
Adividend payments to the industry's shareholders
Bjob losses among the industry's workforce
Cprice increases for the industry's product
Dthe closure of unprofitable factories in the industry
Mark scheme
54May / June 2021 · Paper 32 · Q2Show mark scheme →
AGovernment intervention could increase positive externalities.
BGovernment intervention could increase the availability of merit goods.
CGovernment intervention could lead to a less efficient outcome.
DGovernment intervention could reduce information failure.
Mark scheme
55May / June 2021 · Paper 32 · Q14Show mark scheme →
AFirms within the scheme are required to have a sufficient number of permits to cover the amount of pollution generated in production.
BFirms improve their technology to reduce the number of permits they require.
CFirms that do not use all of their permits can sell some of them to other firms.
DThe permits do not impose strict enough limits on carbon emissions.
Mark scheme
56Feb / March 2021 · Paper 32 · Q14Show mark scheme →
Afree good
Bgovernment regulation
Cmerit good
Dnudge theory
Mark scheme