Practise 66 real questions on Government microeconomic intervention from 2021 to 2026. See the answer and explanation as soon as you answer.
Government microeconomic intervention is one of the 11 main topics in our A Level Economics (Cambridge (CAIE) 9708) question bank, and about 7% of its real questions come from it. Tayyari Karo has 66 real questions on this topic from 2021 to 2026, from Paper 1, Paper 2, Paper 3, Paper 4; 47 are multiple choice and marked instantly, and the rest are structured questions with a model answer. By difficulty: 26 medium, 23 hard, 17 easy.
Work through the questions below, then open the explanation for each one. Redo the ones you missed a few days later.
These are real past-paper questions. Think of your answer first, then open the explanation.
Which combination would occur for a demerit good? (impact on the consumer / amount consumed)
Answer: A. negative / over-consumed
A demerit good harms the consumer (negative impact), and consumers underestimate this, so it is over-consumed.
The market for good X is in equilibrium with 1000 units sold at a price of $10. The government puts a specific tax of $1 per unit on the producers of good X. Which value for the price elasticity of demand for good X will generate the largest tax revenue?
Answer: A. 0
With perfectly inelastic demand (PED = 0) quantity does not fall, so the tax is collected on all 1000 units.
A government wishes to raise the incomes of farmers without raising the price of food to consumers. Which policy should it use?
Answer: C. a payment of a subsidy to farmers to produce food
A subsidy paid directly to farmers raises their income (revenue) without raising the market price paid by consumers, since it lowers farmers' costs rather than raising the price they charge.
Which statement is not an example of government failure?
Answer: C. government intervention leading to an increase in consumer surplus
Government failure occurs when intervention makes the allocation of resources less efficient or reduces overall welfare. An increase in consumer surplus resulting from intervention represents a welfare gain, not a failure, so it is not an example of government failure.
In mixed economies, what explains why the provision of certain goods and services will remain under government control?
Answer: A. The market system fails to provide public goods.
Pure public goods (non-excludable and non-rival, e.g. national defence) would not be profitably provided by private firms because of the free-rider problem, so government provision is needed — a case of market failure.
What is an example of privatisation?
Answer: A. the sale on the market of a French state-owned power-generation company
Privatisation is the transfer of an asset/enterprise from public (state) ownership to the private sector. Only A describes a state-owned firm being sold into private ownership; B and D are transfers between private owners, and C is nationalisation (the reverse of privatisation).
Section B, Either. 2 (a) Explain the difference between a public good and a merit good and consider whether health care should be classified as a public good or a merit good. [8]
Point-based: AO1 up to 3, AO2 up to 3, AO3 up to 2. AO1: a public good is non-rival and non-excludable, so a price is difficult or impossible to charge because of the free-rider problem and it must be provided by the state (1); a merit good is a private good likely to be under-produced and under-consumed in a market as a result of market failure, e.g. many who would benefit from health care cannot afford it (1); clear explanation of the difference: public goods are non-rival and non-excludable, merit goods are rival and excludable (1). …
The full model answer is in the app.
OR 3(b) Assess whether consumers always benefit when the government of a mixed economy reduces the role of the market mechanism in allocating resources. [12]
AO1/AO2 (max 8 marks): advantages of the market mechanism (decisions made by consumers/producers in their own self-interest; resources allocated by the price mechanism with little government intervention) versus disadvantages (merit goods such as education underprovided/underconsumed, demerit goods such as tobacco overprovided/overconsumed, public goods such as police not provided); advantages of government intervention (decisions taken in the national interest, a more equitable distribution of income) versus disadvantages (inefficient allocation of resources, lower-quality products from lack of competition/profit motive). …
The full model answer is in the app.
| Session | Paper 1 | Paper 2 | Paper 3 | Paper 4 |
|---|---|---|---|---|
| May/June 2026 | 6 | 4 | – | – |
| May/June 2025 | 2 | 2 | – | – |
| October/November 2025 | 5 | 1 | – | – |
| May/June 2024 | 1 | – | – | – |
| October/November 2024 | 3 | 2 | – | – |
| May/June 2023 | 2 | – | – | – |
| October/November 2023 | 1 | 3 | 6 | 1 |
| May/June 2022 | 5 | – | – | – |
| October/November 2022 | 4 | 4 | – | – |
| May/June 2021 | 6 | 1 | – | – |
| October/November 2021 | 6 | 1 | – | – |
66 real A Level Economics (9708) questions on Government microeconomic intervention from 2021 to 2026, from Paper 1, Paper 2, Paper 3, Paper 4. Each one shows the year, session and paper it came from.
Yes. Every question shows the correct answer and a short explanation the moment you answer.
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