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Table of Contents

  1. Topic pack - Microeconomics - introduction
  2. 1.1 Competitive Markets: Demand and Supply
  3. 1.1 Competitive Markets: Demand and Supply - notes
  4. 1.1 Competitive markets - questions
  5. 1.1 Competitive markets - simulations and activities
  6. 1.2 Elasticities
  7. 1.2 Elasticities - notes
  8. Section 1.2 Elasticities - questions
  9. Section 1.2 Elasticities - simulations and activities
  10. 1.3 Government intervention
  11. 1.3 Government Intervention - notes
  12. 1.3 Government intervention - questions
  13. 1.3 Government intervention - simulations and activities
  14. 1.4 Market failure
  15. 1.4 Market failure - notes
  16. Section 1.4 Market failure - questions
    1. Market failure - short answer
    2. Externalities - short answer
    3. Externalities & allocative efficiency - short answer
    4. Externalities - self-test questions
    5. Public goods - short answer
    6. Merit goods - short answer
    7. Demerit goods - short answer
    8. Types of goods - self-test questions
    9. Government responses - short answer
    10. Common access resources - activities
    11. Overexploitation - questions
    12. Sustainability - report
    13. Plastic bags - carrying the weight of the environment?
    14. Running cars on biofuels can be unethical
    15. Cement - the hidden polluter?
    16. African roses - a sign of change
    17. Congestion charging
    18. Putting a price on carbon
    19. Power bills to soar in 'green reforms'
    20. Beyond Kyoto
    21. Economic growth cannot continue
    22. The rush to find Jade
    23. Chopstick tax
    24. Taxing light bulbs - that's a bright idea
    25. Trading pig excrement
    26. Congestion pricing
    27. Packaging tax
    28. Airport expansion plans
  17. Section 1.4 Market failure - simulations and activities
  18. 1.5 Theory of the firm
  19. 1.5 Theory of the firm - notes (HL only)
  20. Section 1.5 Theory of the firm - questions
  21. Section 1.5 Theory of the firm - simulations and activities
  22. Print View

Market failure - short answer

question

Market failure - introduction

Question 1

Explain the term market failure.

Question 2

What is short-termism, and what is its role in market failure?

Question 3

(a) Explain why environmental pollution is regarded as a source of market failure.

(b) Evaluate two different policies that a government might implement to reduce pollution.

Question 4

Assess the arguments for and against subsidising public transport.

Question 5

Friedman

"The existence of a free market does not of course eliminate the need for government. On the contrary, government is essential both as a forum for determining the rules of the game and as an umpire to enforce the rules decided on.

What the market does is to reduce greatly the range of issues that must be decided through political means, and thereby to minimise the extent to which government need participate directly in the game. The characteristic feature of action through political channels is that it tends to require or enforce substantial conformity. The great advantage of the market, on the other hand, is that it permits wide diversity. It is, in political terms, a system of proportional representation. Each man can vote, as it were, for the colour of tie he wants and get it: he does not have to see what colour the majority wants and then, if he is in the minority, submit."

Source: Milton Friedman, Capitalism and Freedom (Chicago University Press, 1962)

Thatcher

"Freedom is indivisible. Once the state controls the means of production, distribution and exchange, all of us would become dependent on it." (1986)

Gray

"Hayek's insight is that against a background of stable laws, human individuals, left to their own devices, will produce an order spontaneously which is more complex and more stable than any which could be designed by the human mind. It's also an order ... which embodies their purposes and their goals. The moral defence of the market is that it protects freedom and voluntary exchange: whereas the moral hazard of economic planning is that it subordinates the purposes of some to those of the rulers."

John Gray (Oxford University, 1989)

Part (a)

All three quotes equate "freedom" with a market system. Explain the reasons that the authors would be likely to give for this.

Part (b)

In what ways might a market system not lead to greater "freedom" for all?