Question 1
Which one of the following is an example of government failure associated with the maximum price?
Answer: B.
Options A, C, and D are incorrect because they describe market outcomes rather than government failure. A contraction in demand (A), excess supply (C), and an extension in supply (D) are simply the mechanical changes in quantity that result from price interventions; they are market responses to the price change, not the failure of the government's intervention itself.
What this practice covers
Real past-paper questions, the answer key from the mark scheme, and the explanation that goes with it. Each one is marked the moment you pick, the correct option is shown whether or not you found it, and the full explanation opens either way. No account needed to answer them.
These questions are drawn from past Edexcel A-Level papers. 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.
Keep going multiple-choice questions →
What examiners see students get wrong here
These are the errors that cost marks on market failure, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Confusing negative externalities of production (shift the cost curve) with consumption (shift the benefit curve). Ask who is causing the third-party effect.
- Shading the welfare loss triangle in the wrong place, or omitting it.
- Defining public goods as "goods the government provides", the test is non-excludable and non-rival.
- Confusing merit goods with positive externalities. Merit goods are about information failure and the individual's own benefit.
- Confusing adverse selection (before the transaction) with moral hazard (after it).
- Treating inequality as an efficiency failure rather than an equity issue.
- Forgetting that the free-rider problem causes complete market failure.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Market Failure revision notes.