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.
Question 2
Which one of the following economic thinkers supported the idea of a command economy?
Answer: D.
Adam Smith is incorrect as he is the "father of economics" who championed free-market capitalism and the "invisible hand." Friedrich Hayek is also incorrect; he was a staunch critic of central planning, arguing that it leads to inefficiency and a loss of personal freedom. John Maynard Keynes is incorrect because, while he supported government intervention to manage aggregate demand during recessions, he still believed in a mixed economy rather than a system where the state completely dictates all production and distribution decisions.
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 government intervention, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Describing an intervention without a diagram showing how it moves output to the social optimum.
- Saying government failure means the policy "did not work perfectly", it means a net welfare loss.
- Discussing a maximum price without identifying the shortage, or a minimum price without the surplus.
- Forgetting the opportunity cost of subsidies and state provision.
- Ignoring elasticity, an indirect tax on an inelastic good barely changes behaviour.
- Treating all stakeholders as a single group.
- Assuming that identifying market failure automatically justifies intervention.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Government Intervention revision notes.