Analyse the different causes of market failure.

Mark scheme

Marking points from the official mark scheme. The mark or mark type is shown in brackets.

1. Knowledge 2, Application 3, Analysis 3
2. Knowledge: 2 marks for identification of relevant causes of market failure (e.g. externalities / public goods / information gaps / monopolies / factor immobility)
3. Application: 3 marks for providing examples for each cause (e.g. pollution for negative externality, street lighting for public good, imperfect knowledge for information gap, single firm for monopoly, geographical/occupational immobility)
4. Analysis: 3 marks for explaining how each cause leads to market failure (e.g. over-provision/under-provision, misallocation of resources, higher prices/lower output for monopoly, unemployment for immobility)