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Edexcel A-Level Economics AS 1.3.5 1b Sources of Market Failure Externalities the Free Rider Problem Non Provision of Questions

Practise recognising sources of market failure, from externalities and public goods to imperfect information, moral hazard and bubbles.

Syllabus
First assessment 2019
Course
Economics YEC11
Level
AS

Exam points

  • classify contextual examples as externalities, free riding, moral hazard or market bubbles
  • define speculation as buying assets for an expected price gain and link it to bubble formation
  • analyse banking or insurance failure through moral hazard and asymmetric information
  • evaluate causes using bailout incentives, hidden risk, insurance excesses and third-party costs

Edexcel A-Level Economics AS 1.3.5 1b Sources of Market Failure Externalities the Free Rider Problem Non Provision of Questions question 1

[Maximum number: 1]

Which one of the following is an example of market failure?

A

The free-rider problem that results in the underprovision of public goods

B

Higher prices create an incentive for firms to increase the production of a good

C

New government regulations that result in excessive administration costs

D

Government provision of healthcare to move towards the social optimum output

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