Cambridge International as and a level Economics Ebook

SELF-ASSESSMENT TASK 
8.7
Explain why each of the following is an example of 
government failure:
a
An underestimation of the full benefi t to society of 
public transport that means only a small subsidy is 
being provided by the government.
b
Th
e building of a new road that has unclear benefi ts 
in an area where the government fears that it could 
lose votes at the next election.
c
A high tax on health care, which forms a signifi cant 
part of many poorer people’s budgets.
d
A high level of unemployment benefi t that means 
that people can sometimes earn more by not having 
paid employment.
for new fi rms to enter the market, for reduced fares and for 
more people to travel. Obviously there are many benefi ts, 
but there is the clear confl ict involved with respect to 
diminishing global fuel resources and the now proven 
negative eff ect of increased air transport use as a serious 
contributor to global warming and climate change.
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Cambridge International A Level Economics

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Exam-style questions
1 
As economies grow and develop, the market has less 
of a role and government a greater role in securing 
an eff icient allocation of resources. Discuss the 
extent to which you agree with this view.
 [25]
2
In 2013 the Intergovernmental Panel on Climate 
Change published clear evidence that the growth 
in air transport was one of the main contributors to 
climate change.
a
Using a diagram, explain the market failure 
associated with the increased use of air 
transport.
[12]
b
Discuss the extent to which an indirect tax on 
air passengers might reduce the demand for air 
transport.