Pearson Edexcel IAL Economics 1.3.6.2b Causes of government failure: • i

Practise explaining why intervention can fail, from information gaps and incentives to administrative costs, moral hazard and unintended effects.

Exam points

select the cause of government failure shown by administrative costs or smuggling
evaluate how diesel tax differences can create unintended consequences
link weak incentives or information gaps to inefficient state provision

[Maximum number: 1]

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

Market forces eliminating excess supply of a product by enabling its price to fall

A market bubble emerging in the value of shares on the stock exchange

The introduction of a tax that causes a decrease in external costs

The introduction of a tax that causes an increase in smuggling

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