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2 marksMarket Failure

CAPE Economics Unit 1 · 2012 · Paper 2 · Question 4(c)(ii)

Explain how a public good may cause market failure.

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Other parts of this question

  1. 4(a)(i)Define 'economic efficiency'.[2 marks]
  2. 4(a)(ii)Define 'market failure'.[2 marks]
  3. 4(b)(i)Distinguish between 'private benefits' and 'social benefits'.[4 marks]
  4. 4(b)(ii)Explain how divergence between private benefits and social benefits leads to market failure.[1 mark]
  5. 4(c)(i)Compare the characteristics of a 'public good' with those of a 'private good'.[4 marks]
  6. 4(c)(iii)Explain how the government may respond to the problem caused by public goods and externalities.[2 marks]
  7. 4(d)Draw a diagram illustrating 'deadweight loss' and use it to explain how a monopoly can cause market failure.[8 marks]

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