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6 marksMarket Failure

CAPE Economics Unit 1 · 2009 · Paper 2 · Question 4(b)(iii)

Using suitable examples, explain how moral hazards cause market failure.

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  1. 4(a)Select any three pairs from (i) Private cost and social cost, (ii) Merit good and public good, (iii) Positive externality and negative externality, and (iv)…[21 marks]
  2. 4(b)(i)Using suitable examples, explain how public goods cause market failure.[6 marks]
  3. 4(b)(ii)Using suitable examples, explain how externalities cause market failure.[6 marks]
  4. 4(c)Explain how governments can solve the problem caused by public goods.[11 marks]

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