Market failure — Paper 1 · IGCSE Economics (9-1) 0987

5 What aspect of demerit goods means they are overproduced? A clear product information B high external costs C high product taxes D low customer demand

1 marks

Answer: B

This question in 0987/11 May/June 2020

5 What is a cause of market failure? A many firms B monopoly C profit maximisation D specialisation

1 marks

Answer: B

This question in 0987/12 May/June 2020

19 Why are governments responsible for the defence of the country? A It is impossible to charge a price for defence. B It prevents individual citizens having access to weapons. C Only governments can manufacture weapons. D Providing defence is very expensive.

1 marks

Answer: A

This question in 0987/12 May/June 2020

5 Why might a market economy fail to achieve the best use of scarce resources? A Consumers may lack information about which good to buy. B Demerit goods are underconsumed. C Public goods are overconsumed. D Most resources are owned by the government.

1 marks

Answer: A

This question in 0987/12 Oct/Nov 2020

19 The government wants to reduce the consumption of cigarettes. Which policy would be most likely to do this? A increasing a subsidy on cigarettes B increasing income tax C increasing interest rates D increasing the indirect tax on cigarettes

1 marks

Answer: D

This question in 0987/12 Oct/Nov 2020

6 What is an example of an external benefit from an individual cycling, rather than driving, to work? A higher cost of building cycle lanes B improved physical fitness to the individual from cycling C lower cost of cycling compared with driving to work D reduced congestion for other road users

1 marks

Answer: D

This question in 0987/11 May/June 2021

6 Which problem will be reduced by a government subsidy to a firm? A absence of a public good B abuse of monopoly power C overconsumption of a demerit good D underconsumption of a merit good

1 marks

Answer: D

This question in 0987/12 May/June 2021

4 Which combination of characteristics describes a public good? A excludable and non-rival in consumption B excludable and rival in consumption C non-excludable and non-rival in consumption D non-excludable and rival in consumption

1 marks

Answer: C

This question in 0987/12 Oct/Nov 2021

5 In recent years, a government has started to make more use of the free market system. However, they are doing it very slowly to avoid the disadvantages that a free market system might bring. What is a possible disadvantage of the free market system? A decreased incentive to work B decreased levels of pollution C increased efficiency D increased inequality of income

1 marks

Answer: D

This question in 0987/12 May/June 2022

16 The chart shows a government’s spending in a year. 40 000 $ (millions) 35 000 34 006 30 000 25 000 20 000 18 660 15 280 15 000 10 000 5050 5000 2390 0 social security health education law and defence and welfare order What was the total government spending on public goods? A $2390 million B $5050 million C $7440 million D $33 940 million

1 marks

Answer: C

This question in 0987/12 May/June 2022

17 A government levies a specific tax on the supply of cigarettes. At the same time it starts a campaign to explain the health risks of smoking cigarettes. Which diagram illustrates the effects on the demand and supply of cigarettes? A B price price S1 S2 S2 S1 D D O quantity O quantity C D price price S2 S1 S1 S2 D2 D1 D1 D2 O quantity O quantity

1 marks

Answer: C

This question in 0987/12 May/June 2022

8 To reduce traffic congestion, a government decides to build a new road. There is a toll charge on the new road. What is the main purpose of this government intervention? A to address the problem of market failure B to discourage people from using public transport C to ensure the supply of transport through the free market D to obtain revenue from the levy of a toll

1 marks

Answer: A

This question in 0987/12 Oct/Nov 2022

8 For some illnesses, wearing a face mask has a benefit as it could prevent people from getting infected. Not all people are willing to wear face masks. Based on the statement above, why would there be an inefficient allocation of face masks in the free market? A Consumers in the free market only consider private costs and benefits. B Face masks are non-rival and non-excludable. C There is abuse of monopoly power by the producer of face masks. D There is perfect information in the free market.

1 marks

Answer: A

This question in 0987/11 May/June 2023

10 A government decides to reduce air pollution in city centres by giving financial assistance to bus companies, reducing their costs of production and prices for passengers. Which type of policy measure is this? A a maximum price B a minimum price C a subsidy D regulation

1 marks

Answer: C

This question in 0987/11 May/June 2023

8 What might be an external benefit of an increase in the number of university graduates in an economy? A an increase in revenue for the universities from fee-paying students B an increase in tax revenue from a more productive labour force C an increase in graduate employment as a percentage of the working population D an increase in wages for graduates

1 marks

Answer: B

This question in 0987/12 May/June 2023

18 What is the most likely reason to increase government subsidies? A to decrease consumption of a merit good B to increase consumption of a merit good C to decrease consumption of a demerit good D to increase consumption of a demerit good

1 marks

Answer: B

This question in 0987/12 May/June 2023

9 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 enjoyment lost by those unable to use the countryside C the increase in profits for local businesses D the wages paid to the construction workers

1 marks

Answer: B

This question in 0987/12 Oct/Nov 2024

16 A competitive industry becomes a monopoly. What is the most likely advantage for consumers? A consumer choice may increase B economies of scale may reduce prices C more goods may be produced D prices may be set by market forces

1 marks

Answer: B

This question in 0987/12 Oct/Nov 2024

9 What is a characteristic of a demerit good? A it is more beneficial to the consumer than they realise B it is overconsumed in the free market C it is underproduced in the free market D it provides external benefits

1 marks

Answer: B

This question in 0987/12 May/June 2025

9 A bridge is built over a river which enables journey times to be reduced. The table shows costs and benefits of building the bridge. $000 private benefit 12 private cost 10 external benefit 8 external cost 5 Which calculation represents social benefit? A $12000 – $10000 = $2000 B $8000 – $5000 = $3000 C $12000 + $5000 = $17000 D $8000 + $12000 = $20000

1 marks

Answer: D

This question in 0987/12 Oct/Nov 2025