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Edexcel IAL Economics 1.3.5.1b sources of market failure

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 extracts as externalities, free riding, moral hazard or speculation
  • evaluate how imperfect information affects insurance or financial markets

1.3.5.1b - Sources of market failure: • externalities • the free-rider problem; non-provision of 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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