CAIE A-Level Economics 8.1.2 Government failure
Practise recognising when intervention worsens allocation, creates side effects or leaves social costs above social benefits.
- Syllabus
- 2026–2028
- Course
- Economics 9708
- Level
- A2
Exam points
- distinguish government failure from successful correction of a market failure
- link poor information, incentives or side effects to reduced economic welfare
8.1.2—Government failure question 1
[Maximum number: 1]
To reduce the damage done by cigarette smoking, the government of a country increases the indirect tax on cigarettes and makes it illegal to smoke in public.
Which combination of circumstances is most likely to result in government failure in its attempt to reduce the damage done by cigarette smoking?
price elasticity of
demand for cigarettes
government spending
on law enforcement
> 1
high
> 1
low
< 1
high
<1
low
D
All question bank results loaded