Economics Multiple Choice Question – 22 August 2017

Which ONE of the following is an example of a government failure when attempting to correct a market failure?

Select ONE answer:

1. Privatisation of railway networks
2. Subsidies to firms to assist with regional unemployment
3. Use of speed cameras to reduce road traffic accidents
4. Use of education films to reduce the consumption of tobacco
5. Shortage of available rental properties due to rent-cap legislation

Draw the supply and demand diagram which shows how government intervention fails to correct market failure.
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 5 – Government intervention to resolve market failures can also fail to achieve a socially efficient allocation of resources. Government failure is a situation where government intervention in the economy to correct a market failure creates inefficiency and leads to a misallocation of scarce resources.

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