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8 marksMarket Failure

CAPE Economics Unit 1 · 2005 · Paper 2 · Question 4(c)(ii)

Define externalities and explain how they cause market failure.

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Other parts of this question

  1. 4(a)Define the term 'market failure'.[2 marks]
  2. 4(b)'The price of oil is rising due to political instability in some oil-producing countries.' Explain why this is NOT an indication of market failure.[6 marks]
  3. 4(c)(i)Define monopolistic power and explain how it causes market failure.[8 marks]
  4. 4(c)(iii)Define public good and explain how it causes market failure.[8 marks]
  5. 4(d)(i)Explain how regulation can be used to remove the effects of monopoly power.[6 marks]
  6. 4(d)(ii)Explain how taxation or subsidy can be used to remove the effects of externalities.[6 marks]
  7. 4(d)(iii)Explain how government intervenes to ensure optimal production of public goods.[6 marks]

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