Edexcel A Level Economics B
Edexcel A Level Economics B 1.5 Market Failure Exam Questions
Free Edexcel A Level Economics B exam questions on 1.5 Market Failure, with mark schemes. Covers externalities, public goods and information problems.
1.5 Market Failure exam questions
1 question pack of real past exam questions with its mark scheme. Answer every question without notes, then mark your answers line by line against the mark scheme.
StemUp mark scheme flashcards
A Level Economics Flashcards
Every answer is written in mark scheme wording, so you learn exactly what examiners give marks for. Pick your exam board, then test yourself with the questions on this page.
View flashcards
About Edexcel A Level Economics B 1.5 Market Failure
1.5 asks why markets sometimes allocate resources badly. Data response questions often use real cases such as pollution, health or the environment.
What you need to know
- Market failure A misallocation of resources where the free market does not maximise social welfare.
- Externalities Negative and positive externalities, with private and social costs and benefits and the welfare loss on a diagram.
- Public goods Non-rival and non-excludable, leading to the free rider problem.
- Information gaps Asymmetric information leads to over or under-consumption, for example of insurance or second-hand goods.
Common mistakes in 1.5 Market Failure
- Shading the wrong welfare loss triangle.
- Defining a public good as anything the government provides.
- Forgetting the third party when defining an externality.
Try three 1.5 Market Failure exam-style questions
1. Define a positive externality. (2 marks)
Show the mark scheme answer
A benefit from production or consumption (1) that is received by a third party not involved in the transaction (1).
2. Explain why the free market under-provides education. (3 marks)
Show the mark scheme answer
Education creates external benefits such as a more productive workforce (1). Individuals only consider private benefits (1), so consumption is below the socially optimal level (1).
3. Explain the free rider problem. (2 marks)
Show the mark scheme answer
People can benefit from a non-excludable good without paying (1), so firms cannot charge and the good is under-provided by the market (1).
1.5 Market Failure FAQs
What does Edexcel A Level Economics B 1.5 Market Failure cover?
Types of market failure, externalities, public goods and information gaps.
Which diagrams do I need?
Negative production and positive consumption externality diagrams showing the welfare loss.
How does this link to government intervention?
Government intervention, the other part of 1.5, uses taxes, subsidies, regulation and information to correct these failures.
Revise this topic with flashcards: A Level Economics Flashcards, with mark scheme answers for Anki and Quizlet.
