Lesson 2.11.2

2.11.2 Government failure and effectiveness of intervention Quiz: OCR Economics, Unit 2

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 2.11.2, Government failure and effectiveness of intervention: 20 multiple choice questions for the OCR Economics (H460), Unit 2: The role of markets, written with Revision Ninja.

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The 20 questions

  1. What occurs when government intervention alters price signals, leading to misallocation of resources?

    • Moral hazard
    • Market failure
    • Government failure
    • Regulatory capture

  2. What is the primary risk of setting a maximum price on rented housing?

    • Housing shortage
    • Housing surplus
    • Excess supply
    • Reduced demand

  3. Which cost of government intervention arises from administering and enforcing a policy?

    • Administrative cost
    • Private cost
    • Opportunity cost
    • External cost

  4. Why might a government fail to set an optimal tax on a negative externality?

    • Time lag
    • Imperfect information
    • Regulatory capture
    • Moral hazard

  5. What occurs when a regulatory agency acts in the interest of firms rather than consumers?

    • Regulatory capture
    • Government failure
    • Market distortion
    • Policy failure

  6. What is an unintended consequence of setting a high minimum wage for low-skilled workers?

    • Excess demand
    • Labour shortage
    • Higher unemployment
    • Deflation

  7. Which policy objective directly conflicts with imposing higher indirect taxes on energy to cut emissions?

    • Inflation targeting
    • Debt reduction
    • Poverty reduction
    • Price stability

  8. What term describes politicians prioritising quick benefits before elections over long-term economic efficiency?

    • Principal-agent problem
    • Short-termism
    • Time lag
    • Regulatory capture

  9. Subsidising inefficient firms may lead to which source of government failure?

    • Resource misallocation
    • Revenue maximisation
    • Allocative efficiency
    • Lower prices

  10. If a £10 tax generates £8 in administrative costs, what is the net social yield per unit?

    • -£2
    • £2
    • £80
    • £18

  11. What are costs incurred by businesses to conform to government regulations called?

    • Menu costs
    • Administrative costs
    • Compliance costs
    • Production costs

  12. Imposing a high tax on cigarettes often leads to which unintended market outcome?

    • Market surplus
    • Illegal smuggling
    • Price drop
    • Lower demand

  13. What law states that economic interventions often produce unexpected and undesirable side effects?

    • Supply and demand
    • Unintended consequences
    • Comparative advantage
    • Diminishing returns

  14. What type of government failure occurs when policy implementation takes too long to affect the economy?

    • Short-termism
    • Time lag
    • Regulatory capture
    • Asymmetric information

  15. Failing to enforce clear property rights leads to which specific market and policy outcome?

    • Overexploitation
    • Complete efficiency
    • Monopoly power
    • Zero cost

  16. What tool estimates social costs and benefits to determine if an intervention is worthwhile?

    • Regression analysis
    • Marginal utility
    • Price elasticity
    • Cost-benefit analysis

  17. What causes a buffer stock scheme to fail during consecutive years of high harvest yields?

    • Stock depletion
    • Import tariffs
    • Excessive storage costs
    • High market prices

  18. What type of inefficiency often occurs in state-provided goods due to lack of profit incentive?

    • Productive efficiency
    • Dynamic efficiency
    • Allocative efficiency
    • X-inefficiency

  19. High rates of income tax can create an unintended incentive for workers to do what?

    • Reduce work hours
    • Pay more tax
    • Increase output
    • Work overtime

  20. Which situation describes a net welfare loss resulting from government intervention in a market?

    • Market failure
    • Equity failure
    • Government failure
    • Missing market

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