Lesson 1.3.1
1.3.1 Types of market failure Quiz: Pearson Edexcel Economics, Unit 1
20 questions
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Lesson 1.3.1, Types of market failure: 20 multiple choice questions for the Pearson Edexcel Economics (9EC0), Unit 1: Theme 1: Introduction to markets and market failure, written with Revision Ninja.
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The 20 questions
-
What term describes a situation where the free market fails to allocate resources efficiently?
- Market equilibrium
- Market failure
- Government failure
- Regulatory capture
-
Which of the following is a primary type of market failure in a free market economy?
- Externalities
- Trade deficits
- Unemployment
- Inflation
-
Which type of market failure occurs when buyers or sellers lack complete knowledge?
- Information gaps
- Public goods
- Negative externalities
- Excess demand
-
Why does the free market fail to provide adequate quantities of public goods?
- Excessive profit margins
- High import tariffs
- Diminishing marginal utility
- Free rider problem
-
Factory pollution affecting local residents without compensation is an example of which concept?
- Information gap
- Negative externality
- Positive externality
- Public good
-
What is the main economic justification for government intervention in individual markets?
- Maximising tax revenue
- Controlling national debt
- Correcting market failure
- Eliminating private profit
-
What outcome occurs when government intervention in a market leads to a net welfare loss?
- Information gaps
- Negative externalities
- Government failure
- Market failure
-
Which market is most susceptible to information gaps between buyers and sellers?
- Foreign currency
- Supermarket milk
- Government bonds
- Second-hand cars
-
Which of the following best represents a pure public good?
- Higher education
- National defence
- Healthcare services
- Public transport
-
What general outcome is produced when a market suffers from market failure?
- Maximum social welfare
- Resource misallocation
- Productive efficiency
- Market equilibrium
-
What term describes costs or benefits imposed on third parties outside a market transaction?
- Private costs
- Externalities
- Public goods
- Information gaps
-
Which characteristic of a lighthouse prevents private firms from charging users effectively?
- Information symmetry
- Non-rivalry
- Diminishing returns
- Non-excludability
-
What situation exists when one party in a transaction possesses more knowledge than the other?
- Symmetric information
- Asymmetric information
- External benefits
- Complete information
-
What happens to market output when unpriced external costs exist in production?
- Zero production
- Overproduction
- Underproduction
- Social optimum
-
What two characteristics define a pure public good?
- Non-rival, non-excludable
- Non-rival, excludable
- Rival, non-excludable
- Rival, excludable
-
What market outcome occurs when a good generates positive consumption externalities?
- Productive efficiency
- Overproduction
- Overconsumption
- Underconsumption
-
What term describes a situation where the price mechanism fails to allocate resources efficiently?
- Moral hazard
- Government failure
- Market failure
- Asymmetric information
-
Which of the following is an example of a pure public good?
- Street lighting
- Public transport
- Higher education
- Healthcare
-
Which situation represents a market failure caused by negative externalities?
- Consumer surplus
- Price stability
- Allocative efficiency
- Excess pollution
-
Why do free market economies typically under-provide pure public goods?
- Principal-agent problem
- Diminishing returns
- Moral hazard
- Free-rider problem
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