PRESIDENTIAL SCHOOL IN FERGANA

0455 Cambridge IGCSE Economics

Grade ___________Students full name _________________________________________________

Type of assessment: ___________________Term : ___________date:_______________________

Case Study Questions on Market Failure:

1. The government of a country decides to nationalize the telecommunications industry due to concerns
about access, quality, and fairness. Analyze the potential advantages and disadvantages of this decision
from an economic perspective.

Advantages: improved access to services, higher quality, potentially lower prices.

Disadvantages: reduced efficiency, reduced innovation, decreased competition can cause to high price
later.

2. A government implements a subsidy program to encourage the production of renewable energy. Evaluate
the economic benefits and drawbacks of this policy, considering the impact on the environment, market
competition, and consumer prices.

Benefits: more investment in clean energy, reduces environmental impact, promotes innovation.

Drawbacks: cost for government, stops in market competition, less competition, may lead to higher
consumer prices in the short time.

3. In an effort to address income inequality, a government introduces a progressive income tax system.
Assess the economic implications of this policy, including its impact on incentive structures, government
revenue, and wealth redistribution.

Implications:
higher tax rates for higher incomes may reduce incentives for additional work or investment;
increases government revenue due to higher tax rates on higher incomes;
reduce income inequality

4. A country implements a competition policy to promote fair market conditions and prevent monopolistic
practices. Analyze the potential economic benefits and drawbacks of this policy, considering consumer
welfare, innovation, and market efficiency.

Benefits: increases consumer welfare, encourages innovation and efficiency, prevents monopoly causing
improvement in market efficiency.
Drawbacks: costs for businesses, reduction in economies of scale

5. The government imposes a maximum price control on rental properties to make housing more affordable
for low-income families. Evaluate the economic consequences of this policy, including its impact on
housing supply, quality, and investment incentives.
 increased demand in low-income families for housing, decrease in housing quality, decrease in supply,
less incentive for investment in rental properties

6. A government decides to implement a carbon tax to reduce greenhouse gas emissions. Assess the
economic effects of this policy, considering its impact on environmental sustainability, market
competitiveness, and consumer behavior.

reduces emissions, provides cleaner technologies, increase costs for businesses and consumers, little
effect on market competitiveness, consumer behavior changes to sustainable choices because of price.

7. A country faces a shortage of essential medical supplies during a health crisis. Explore the economic
implications of implementing a rationing system to allocate these supplies, including the potential impact
on equity, efficiency, and consumer welfare .

We didn’t cover rationing system.

8. The government of a country decides to privatize a state-owned oil company. Analyze the economic
advantages and disadvantages of this decision, considering factors such as competition, efficiency, and
government revenue.

Advantages: increased competition, increased efficiency, attracts investment, increases government

revenue;

Disadvantages: risk of monopoly, unemployment while changing.

9. A government introduces an environmental policy that includes strict regulations on industrial pollution.
Evaluate the economic consequences of this policy, including its impact on industry costs, technological
innovation, and environmental sustainability.

Increases industry costs, provides technological innovation for cleaner production methods, improves
environmental sustainability.

10. A country experiences a significant influx of multinational companies in its manufacturing sector. Analyze
the economic effects of this trend, considering factors such as employment, technology transfer, and the
balance of trade.

Increased employment, more technology will be directed to this productions, (we didn’t cover balance of
trade), increased investment.

QMultiple Choice Questions:

1. Which of the following is a potential benefit of a b) The price ceiling above the equilibrium price
mixed economic system?
c) A surplus of the good in the market
a) Complete government control over resource
d) An increase in consumer surplus
allocation
3. Rationing is a method used to:
b) Maximum market competition and efficiency
a) Limit the production of goods and services
c) Lack of government intervention in the economy
b) Allocate resources through market competition
d) Promotion of income equality through wealth
redistribution c) Limit the amount that can be consumed by
individuals
2. A graph showing a maximum price control would
depict: d) Promote monopolistic practices in the market
a) Quantity supplied exceeding quantity demanded
4. A graph showing the impact of an indirect tax a) Organizations and individuals that operate for
would depict: profit

a) A shift in the demand curve to the right
b) The price paid by consumers increasing and the
price received by producers decreasing
c) An increase in the equilibrium quantity of the
good
d) A decrease in consumer surplus and an increase in
government revenue
5. Competition policy aims to:
a) Promote fair market conditions and prevent
monopolies
b) Increase government control over the economy
c) Limit consumer choices and options in the market
d) Decrease market efficiency and innovation
6. Environmental policies are implemented to:
b) Government-owned entities that provide public
goods
c) Entities that operate without government
intervention
d) Organizations and individuals that engage in non-
profit activities
Q# Answer Q# Answer
1 11
2 12
3 13
4 14
5 15
6 16
7 17
8 18
9 19
10 20

a) Maximize resource depletion and pollution

b) Promote economic growth at the expense of

environmental sustainability

c) Protect the environment and address externalities

d) Encourage deforestation and habitat destruction

7. Nationalization refers to:

a) The transfer of public sector assets to the private

sector

b) The promotion of free market competition

c) The transfer of private sector assets to the

government

d) The establishment of public corporations in

competitive markets

8. Public corporations are:

a) Organizations owned and operated by the private

sector

b) Entities that operate without government

intervention

c) Government-owned entities that provide goods or

services

d) Privately-owned entities that provide public goods

9. The private sector refers to: