What this practice covers
These questions are drawn from past CIE 9708 papers and filtered to efficiency and market failure. 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 Paper 3 MCQs →
What examiners see students get wrong here
These are the errors that cost marks on efficiency and market failure, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- “All market equilibria are allocatively efficient”. Only if market demand and supply reflect all social benefits and costs and market power/information problems are absent.
- “P = MC always proves allocative efficiency”. The MC may be private rather than social, and price may not equal marginal social benefit.
- “On the PPC means allocatively efficient”. It proves productive efficiency for the stated constraints, not that society prefers that product mix.
- “Pareto optimal means fair”. The criterion is silent on equality and distribution.
- “Dynamic efficiency means only lower LRAC”. It also includes better quality, new products, cleaner processes and future capabilities.
- “Merit goods are public goods”. Merit goods are underconsumed because benefits are underestimated or information is imperfect. Pure public goods are non-rival and non-excludable.
- “Government provision proves market failure has been solved”. Intervention can itself be poorly designed. Government failure is examined in Topic 8.1.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Efficiency and Market Failure revision notes.