What this practice covers
These questions are drawn from past AP Economics papers and filtered to market failure and the role of government. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
Start practising concept drills →
What examiners see students get wrong here
These are the errors that cost marks on market failure and the role of government, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Shifting the wrong curve. Check whether the externality arises in production or consumption.
- Marking only one quantity. Both the market quantity and the socially optimal quantity must appear.
- Recommending "a tax" without stating that it equals the marginal external cost at the optimum.
- Putting the deadweight loss triangle on the wrong side of the market quantity in a positive-externality question.
- Calling a common resource a public good. Common resources are rival.
- Saying the market under-provides a public good when it provides none.
- Assuming a price ceiling is always harmful, in a monopoly it can raise output.
- Letting a lump-sum tax change the firm's output. It shifts ATC, not MC.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Market Failure and the Role of Government revision notes.