Market failure and government intervention - OCR A-Level Economics (H460) quiz

Marginal social cost exceeds marginal private cost

Marginal social benefit exceeds marginal private benefit

The market under-produces the good

There is no welfare loss

Marginal private benefit equals marginal private cost

Marginal social benefit equals marginal social cost

Total revenue is maximised

Average cost is minimised

Over-consume the good

Provide none of the good

Under-consume the good

Reach the social optimum

Both fully rival and fully excludable

Non-rival and excludable

Rival and non-excludable

Non-rival and non-excludable

Not provided by the free market at all

Over-provided well beyond the social optimum

Provided only to the consumers who choose to pay

Always provided more cheaply by firms

Insured people taking on far more risky behaviour once they are covered

The highest-risk individuals being most likely to buy insurance

Insurers wrongly refusing to settle perfectly valid claims

Premiums steadily falling as more healthy people insure

It is non-excludable, so private firms are simply unable to charge for it

It generates only negative production externalities and nothing else

Individuals undervalue its long-term private and external benefits

Its market supply curve is perfectly inelastic

Producers

The government

It is always split equally

Consumers

Below the equilibrium price

Above the equilibrium price

Exactly at the equilibrium price

At the level of marginal cost

Every single firm is forced to cut its emissions by exactly the same amount

Firms that can cut emissions cheaply do so and sell spare permits

The government directly fixes the trading price of each permit

Permits remove the need for any overall emissions cap

Carries any administrative or enforcement cost at all

Corrects a market failure at a relatively low cost

Leaves society worse off overall than before

Achieves the social optimum exactly

Lower the price paid by consumers so they buy much more of the good

Increase total output back toward the original free-market level

Provide the good completely free at the point of use

Internalise the externality so price reflects social cost