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Edexcel A-Level Economics AS 1.3.6 2b Causes of Government Failure Questions

Practise identifying smuggling and regulatory capture as government-failure causes, then evaluate tax size, detection, enforcement and external-cost effects.

Syllabus
First assessment 2019
Course
Economics YEC11
Level
AS

Exam points

  • explain how a large tax differential encourages smuggling, lost revenue and enforcement costs
  • identify regulatory capture as a limit to government intervention
  • evaluate the failure by tax size, detection risk, unrecorded trade and external-cost reduction

Edexcel A-Level Economics AS 1.3.6 2b Causes of Government Failure Questions question 1

[Maximum number: 1]

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

A

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

B

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

C

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

D

The introduction of a tax that causes an increase in smuggling

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