Lesson 4.1.8.2

4.1.8.2 The meaning of market failure Quiz: AQA Economics, Unit 1

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 4.1.8.2, The meaning of market failure: 20 multiple choice questions for the AQA Economics (7136), Unit 1: Individuals, firms, markets and market failure, written with Revision Ninja.

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The 20 questions

  1. What basic economic outcome defines the existence of market failure?

    • Price instability
    • Income equality
    • Producer surplus
    • Resource misallocation

  2. What is the defining outcome of a complete market failure?

    • Price caps
    • A missing market
    • Monopoly profits
    • Excess demand

  3. What occurs in a market experiencing partial market failure?

    • Resource misallocation
    • Zero consumption
    • Price equality
    • A missing market

  4. Which market structure imperfection directly causes market failure by restricting output?

    • Perfect competition
    • Monopoly power
    • Economies of scale
    • Elastic demand

  5. How does a market react when the production of a good involves negative production externalities?

    • Prices fall
    • Underproduction occurs
    • Overproduction occurs
    • Production stops completely

  6. What term describes a situation where buyers and sellers have unequal information in a market?

    • Asymmetric information
    • Perfect information
    • Moral hazard
    • External benefit

  7. Why can severe income inequality cause market failure?

    • High elasticity
    • High production costs
    • Lack of demand
    • Excess market supply

  8. What economic problem directly arises from geographical labour immobility?

    • Cyclical unemployment
    • Demand-pull inflation
    • Structural unemployment
    • Hyperinflation

  9. Which type of good typically results in a missing market if left to free market forces?

    • Private good
    • Pure public good
    • Merit good
    • Demerit good

  10. What risk must governments consider before intervening to correct a market failure?

    • Complete market failure
    • Government failure
    • Negative externality
    • Regulatory capture

  11. What is a loss of economic welfare caused by market failure called?

    • Producer surplus
    • Deadweight loss
    • Consumer surplus
    • External cost

  12. How does monopoly power primarily cause market failure?

    • Restricting output
    • Eliminating profits
    • Lowering prices
    • Overproducing goods

  13. Which of the following is an example of a merit good?

    • Healthcare
    • Petrol
    • Street lighting
    • Cigarettes

  14. What occurs when government intervention leads to a net loss of economic welfare?

    • Market failure
    • Regulatory capture
    • Government failure
    • Partial failure

  15. What type of market failure arises when a firm restricts output to charge high prices?

    • Monopoly power
    • Positive externality
    • Asymmetric information
    • Public good

  16. What term describes a situation where sellers know more about a product than buyers?

    • Imperfect mobility
    • Moral hazard
    • Asymmetric information
    • External cost

  17. What is the main outcome of an unpriced negative externality in production?

    • Overproduction
    • Complete failure
    • Underproduction
    • Equilibrium output

  18. What type of market failure occurs when a market fails to function at all, creating a missing market?

    • Regulatory failure
    • Complete market failure
    • Partial market failure
    • Government failure

  19. Which of these activities generates a positive externality in consumption?

    • Smoking
    • Vaccinations
    • Driving cars
    • Coal mining

  20. If social cost exceeds private cost, what does the free market produce?

    • Too little output
    • Zero output
    • Optimal output
    • Too much output

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