CAIE A-Level Economics 7.3.5 Market failure

CAIE A-Level Economics 7.3.5 Market failure
Cambridge International AS & A Level Economics 9708 syllabus for exams in 2026, 2027 and 20282026–2028

Practise recognising when markets misallocate resources because prices fail to reflect wider costs or benefits from an exchange.

How this is tested

  • distinguish allocative inefficiency from productive efficiency in market scenarios
  • recognise external costs or benefits that are missing from market prices

Question 4

[Maximum number: 1]

What arises in situations where there are costs or benefits associated with a transaction that are not fully reflected in market prices?

A

allocative efficiency

B

allocative inefficiency

C

productive efficiency

D

productive inefficiency