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Economics multiple choice questions

GCSE and O level

Market Failure

Multiple Choice Questions and Answers

What could a government do to reduce external costs in the economy?
A direct tax for higher income earners,
B Decrease direct tax for lower income earners
C Increase indirect tax on petrol / gasoline
D Remove indirect tax on tobacco (J10/P1/Q11)

Answer is C

A government intends to build a new international airport in an area of outstanding natural beauty What would be an external cost of this decision?
A the cost of importing construction’ materials
B the countryside that is lost
C the increase in profits for local businesses
D the wages paid to the construction workers [N10/P1/Q8]

Answer is B

What is most likely to be the respon- sibility of a central government?
A the provision of immigration officials at an airport
B the provision of security cameras in a shopping centre
C the provision of security staff at a bank
D the provision of ticket inspectors on a train (N10/P1/Q29]

Answer is A

What is an example of market failure?
A a growth of competition
B an existence
C a spread of pollution
D a surplus of production in the short-term [J11/P1/Q8]

Answer is C

Which action by the operators of an airport directly reduces external costs?

A The stopping of night flights
B The building of a new runway
C The payment of a productivity bonus
D The reduction of charges for landing for air craft {J11/P1/Q9}

Answer is A

What is an example of an external cost?

A a company’s transport costs
B the cost of bringing about a merger
C the cost of buying components from suppliers
D the cost of industrial pollution{N11/P1/Q5]

Answer is D

Journeys in city centres may be made by bus or by car

A bus fares
B car fumes and noise
C licence fees for cars
D purchase of buses [312/P1/Q5)}

Answer is B

What is an example of market failure?
A a monopoly making abnormal profit
B prices charged to cover social cost
C the closure of small, independent shops in a rural area
D the inability of a car producer to achieve economies of scale {[J12/P1/1Q9]

Answer is A

An international company drilled for oil in deep water and caused a major oil leakage, which affected the jobs of the fishing community The government ordered the company to close the well and to stop drilling in the area What are the external costs of this incident?

A the costs borne by the fishing community
B the costs of closing the well
C the costs to the company of drilling the well in deep water
D the loss of revenue when the oil company stopped drilling{N12/P1/Q5]

Answer is A

Which is a type of market failure?
A ageneral increase in the price of hotel rooms in busy summer seasons
B an increase in house prices caused by easier borrowing for house buyers
C anincrease in travel time caused by a road accident
D an increase in unsold goods because of a change in tastes [N12/P1/Q9]

Answer is C

Which government policy would best protect the environment?

A encouraging economic growth
B exploiting natural resources
C increasing tax on fuel
D removing controls on industry{N12/P1/Q23]

Answer is C

A government makes public transport free to try to reduce car use in a city What might explain why people continue to use their own cars?

A Cars are less crowded than public transport
B Car use does not cause external
C Public transport has a better safety record than cars
D Public transport networks require high capital costs [J13/P1/Q8]

Answer is A

What is an example of market failure?

A a balance of trade deficit
B monopoly profits
C rapidly rising price levels
D the production of non-essential goods[J13/P1/Q10]

Answer is B

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