The Reasons and Consequences of Market Failures Questions and Answers Grade 12, Market failure is the economic situation defined by an inefficient distribution of goods and services in the free market. Furthermore, the individual incentives for rational behavior do not lead to rational outcomes for the group.
Activity 1
Study Figure 8.8 and answer the questions that follow.
- What economic technique for enumerating and evaluating is depicted in the illustration? (2)
- Give TWO recent examples of potential ‘operations’ in South Africa that will fit into the illustration. (2)
- List ONE social benefit of each of the above projects. (4)
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Answers to activity 1
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Activity 2
Distinguish between merit and demerit goods. [8]
Answer to activity 2
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Activity 3
Discuss the features of collective goods. [8]
Answer to activity 3
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Activity 4
Discuss the distribution of wealth and income as a consequence of market failure. [8]
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Activity 5
Study the following illustration and answer the questions that follow:
- Identify the negative externality depicted in the illustration. (2)
- List TWO measures that can be applied by government to reduce
this externality. (2) - What is the liability of the factory in this regard? (2)
- What effect will this have on consumer prices? (2)
[8]
Answers to activity 5
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