What this practice covers
These questions are drawn from past CIE 9708 papers and filtered to policies to correct 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 policies to correct market failure, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Treating tax revenue as the measure of success rather than the change in quantity.
- Applying a tax to a positive externality, or a subsidy to a negative one.
- Setting the correction equal to the externality at the free market output rather than at the optimum.
- Asserting that a policy "will solve" the failure with no conditions attached.
- Confusing efficiency arguments with equity arguments.
- Describing a diagram without stating what happens to price, quantity and welfare loss.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Policies to Correct Market Failure revision notes.