Day: June 13, 2025

Which of the following is an example of government intervention to correct a market failure?

Select ONE answer:

1. An increase in corporation tax during an economic boom
2. An increase in the rate of VAT on all goods and services
3. The taxation of goods with negative externalities
4. The taxation of Giffen goods

Show your workings to arrive at your answer, and explain and justify your reasons:

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This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct == > Negative externalities are an example of market failure because they represent situations where the private costs of an activity differ from the social costs of the activity. Economic booms, VAT increases and Giffen goods are not market failures.
4. Not correct

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