CIE A Level Topical Past Paper 2
8.1 Government policies to achieve efficient resource allocation and correct market failure
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Market failure exists in all economies.
Evaluate, with the aid of a diagram(s), the meaning of market failure and two policies a government may use to correct market failure. [20]
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With the help of a diagram, assess the effectiveness of a government’s intervention in the price mechanism to address the causes of climate change. [20]
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Pollution is caused when consumers or producers make decisions based on self-interest. This is a sign of market failure.
With the help of a diagram, evaluate the extent to which government policies should rely upon market forces to address this market failure. [20]
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b) Evaluate two policies a government may implement to reduce the impact of climate change. [13]
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Discuss whether market failure can be successfully eliminated by governments. [25]
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Analyse the reasons why it might be thought necessary for a government to control dominant firms in an industry and consider the methods it might use to achieve such control. [25]
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b) ‘Market failure can always be overcome to increase economic efficiency.’ How far do you agree with this statement? [13]
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‘Smoking cigarettes causes negative externalities and negative externalities cause market failure, which can only be solved by government intervention.’
To what extent do you agree with this statement? [25]