DP Economics Questionbank

Explain why demerit goods are an example of market failure.

Evaluate the effectiveness of using indirect taxation to correct market failure.

Using an externalities diagram, explain how the widespread use of solar panels will decrease the negative externalities of consumption caused by the use of kerosene lamps (paragraph [5]).

Discuss the view that imposing an indirect tax on gasoline (petrol) is the most effective way of reducing the market failure caused by cars.

Using an appropriate externalities diagram, explain why a government might decide to impose a price floor on a demerit good.

Using an externalities diagram, explain how the Chinese infrastructure projects have caused negative externalities (paragraph [6]).

Using an externalities diagram, explain why the garment industry is a source of market failure (paragraph [8]).

Discuss whether government regulation is the most effective way to deal with negative externalities of consumption.

Using an externalities diagram, explain why “business pollution” is leading to market failure in STP (paragraph [5]).

Evaluate the effectiveness of government regulations in achieving a reduction in the consumption of demerit goods.

Using an externalities diagram, explain why the construction of dams on the Mekong River might lead to market failure (paragraph [2]).

Explain why the consumption of merit goods, such as healthy food, can lead to positive externalities of consumption.

Discuss whether advertising by the government is the most appropriate way of increasing consumption of a merit good.

Evaluate the effectiveness of using indirect taxation to correct market failure.

To what extent is advertising the most effective way of increasing the consumption of merit goods?

Using an externalities diagram, explain why the percentage of infants receiving measles vaccinations in Nigeria indicates the existence of a market failure (Table 1).

Using an externalities diagram, explain how “greater access to education” for girls in Pakistan could reduce market failure (paragraph [5]).

Using an externalities diagram, explain the benefits of hygiene and sanitation education programmes (paragraph [5]).

Discuss whether there should always be direct provision of public goods by the government.

Discuss the implications of the direct provision of public goods by a government.

Examine the consequences of the lack of a pricing mechanism for common access resources.

Explain how the overuse of common access resources can lead to negative externalities.

Discuss the view that the best way to reduce the threat to sustainability, arising from the burning of fossil fuels, is for the government to provide subsidies to firms that produce energy through renewable sources.

Define the term sustainability indicated in bold in the text (paragraph [6]).

Evaluate the view that the threat to sustainability, caused by economic activity requiring the use of fossil fuels, is best addressed through the use of carbon taxes.

Discuss the view that tradable permits are more effective than taxes in reducing pollution.

Define the term asymmetric information indicated in bold in the text (paragraph [6]).

Define the term monopoly power.

Discuss the view that legislation is the best way of dealing with the problem of monopoly power.

State two government responses to the abuse of monopoly power.