Quick Quiz (4) Market Failure

A topic from section 2 that is on both the higher and standard level syllabus.

1) Define negative externalities, give an example.

2) Define positive externalities, give an example.

3) Why is monopoly power an example of market failure?

4) Draw an appropriate diagram to show negative externalities in production. Mark on the diagram the welfare loss.

5) Draw an appropriate diagram to show positive externalities in production. Mark on the diagram the welfare loss.

6) What are the two major characteristics of a public good?

7) Give two real world examples of public goods.

8) Explain the difference between merit and demerit goods.

9) State and explain two possible policy solutions to negative externalities.

10) Explain two problems of using taxation as a solution to market failure.