Sample Economics Essay Questions – Market Failure

JC Economics Market Failure Essay Questions


Are you preparing to attempt the Market Failure essay question for your upcoming Prelims or eventual GCE A-Level Econs exams? Good, as this is your best bet to secure that elusive grade “A” for H2 students! Focusing on essays on Market Failure and looking through a list of questions one or your H2 Econs (9757 Syllabus) will help you to filter the most important content knowledge you will need in JC Economics exams.


Here is the listing of Market Failure essay question list:


1 Many cities and countries are embarking on new cultural projects. Presently, government spending in these areas in Singapore is below those of similar size metropolis such as Hong Kong, which is also providing sizeable amount of land for development of arts and entertainment district.

(a) Explain why government intervention is advocated in the markets for public goods and goods where externalities are present. [10]
(b) Assess the economic case for government intervention in the development of cultural projects. [15]
(public goods)


2(a) Explain how market dominance and factor immobility might lead to market failure. [10]
2(b) Assess the extent to which these two forms of market imperfections, rather than any other forms of market failure, is the major cause of government intervention in Singapore.
(market imperfections)


Q3. If consumers and producers pursue self-interest and make rational decisions, there is no need for government intervention. Critically examine the above view. [25]
(market efficiency and failure)


Q4. Singapore government makes it compulsory and free for every Singapore child to be vaccinated against diseases like poliomyelitis, diphtheria, tetanus and pertussis before the age of 12.

(a) Explain the economic justifications for government intervention in the case of vaccination in Singapore.
(b) Discuss whether compulsory vaccination is the best form of government intervention in the market for vaccination in Singapore. [15]
(positive externalities & healthcare)


Q5. “In addition to government subsidies, individuals are expected to shoulder a portion of their own healthcare costs. The 3Ms framework – which refers to Medisave, Medishield and Medifund – is Singapore’s healthcare financing approach that incorporates personal responsibility with risk pooling and community support.”
(Source: Economics in Public Policies: The Singapore Story 2012)

The Singapore government uses both demand and supply side measures to manage the healthcare market. To what extent can such intervention correct the market failure in the industry? [25]
(positive externalities & healthcare)


Q6. “The root cause of market failure is far more often lack of information than externalities, and this is where government should direct their efforts to improve the efficient working of the economy.”

(a) Explain the two types of market failure described above. [10].
(b) Discuss if legislation is the best way for government intervention in the above situations of market failure. [15]
(market failure)


Q7. Governments across the world play an active role in intervention, whether to reduce the growing income inequality or to address market failure.

(a) Explain the role of prices in resource allocation in a market economy. [10]
(b) Assess whether government intervention in markets is always justified. [15]
(market failure)


Q8(a) Use examples to distinguish between i) a private good and a public good (ii) a social benefit and a positive externality. [10]
Q8(b) Assess the usefulness of the above concepts in explaining whether it is the government or the private sector that is responsible for the development and operation of key facilities such as airports and seaports. [15]
(public good)


Q9(a) Explain why government intervention is advocated in markets with both market dominance and income inequity. [10]
Q9(b) Discuss the measures that can be used to address these sources of market failure. [15]
(market dominance and income inequity)


Q10. According to the Compulsory Education Act, a child between the age of 6 and 15 years has to attend a national primary school as a pupil regularly, unless he/she has been exempted from compulsory education.
Adapted from: MOE Website

Discuss whether the Compulsory Education Act is the most appropriate policy adopted by the Singapore government to achieve an efficient allocation of resources in the education market. [25]
(positive externalities & education)


Q11. Explain why congestion caused by cars leads to market failure and assess the extent to which the Singapore government’s policies to address this market failure may need to be adjusted. [25]
(negative externalities & congestion)


Q12(a) Explain how market dominance and immobility of factors of production in a country can lead to market failure.
Q12(b) Discuss the extent to which globalisation has reduced the problems associated with these sources of market failure.
(market imperfections. Market Dominance requires content knowledge of Monopoly, under Market Structures.)



Q13(a) Explain why the markets for public goods and demerit goods fail in each case. [10]
Q13 (b) In Singapore, museums offer free entry to Singapore citizens and Permanent Residents. However, New York’s Metropolitan Museum of Art charges a recommended entrance fee of US25. Assess the economic case for these two approaches. [15]
(positive externalities & merit goods)


Q14. How far can efficiency in resource allocation be achieved by encouraging competition in Singapore? [25]
(market dominance)


Q15(a) Explain why the Singapore government intervenes in the market for healthcare.
Q15(b) Discuss whether such intervention is sufficient in view of the changing demographic conditions in Singapore.
(positive externalities & healthcare)


Q16(a) Explain how the price mechanism allocates resources efficiently.
Q16(b) A government imposes taxes on a variety of goods and services which include alcohol, fuel and some imported goods. Discuss whether taxation would lead to a more efficient allocation of resources.
(negative externalities & demerit goods)


Q17. The Chinese government believes it has more information to overcome pollution oversight as well as to ensure a steady transition from low-cost manufacturing to a more service-oriented economy.

(a) Explain how firms’ missing information on costs and immobility of factors of production lead to inefficiency in resource allocation.
(b) Assess whether government intervention to address the above problems will lead more efficient resource allocation.
(market imperfections)


Q18. Some economists argue that the government achieves the most efficient outcome if they only intervene in the provision of public goods. Discuss this statement with reference to Singapore.
(divergence & public good)


Q19. “An exceptionally large number of new homes are currently being built as part of the cooling measures for the housing bubble. The housing bubble benefits no one and hurts many when it bursts. This allocation of land would hopefully moderate housing prices, so that it would remain affordable for most residents.”
Source: Housing Policies, Budget Debate Singapore

(a) Distinguish between public and private goods, and determine if public housing is a public good.
(b) Using concepts of scarcity, opportunity costs and production possibility curves, discuss if the allocation of land use for public housing is justified.
(positive externalities & housing)


Q20. Some governments provide free services, such as internet broadband and healthcare to households, while other governments merely subsidise production of certain goods and services, such as education.

Discuss the extent to which the Singapore government could intervene in the supply of certain goods and services. [25]
(positive externalities & subsidise)


Q26(a) Explain why government intervention is advocated in the market for healthcare.
Q26(b) Discuss whether healthcare services should be provided free by the government.
(positive externalities & healthcare)


Q27. A fast ageing population will put pressure on the government’s budget. Health Minister of S’pore said that the key to a sustainable healthcare system is to minimise market distortions and to allow healthcare to function as normally as other economic activities.
(Adapted from Economist Conferences, Healthcare in Asia, 30 March 2010)

Evaluate the extent to which the government should intervene in the market for healthcare in Singapore. [25]
(positive externalities & healthcare)


Q28. “Market failure cannot be effectively tackled unless its underlying causes – externalities, lack of information, and irrationality – are accurately identified and understood.”

Using illustrations from S’pore, assess the extent to which government [25] policies have addressed these underlying causes of market failure. [25]
(market failure)


Q29. “When governments intervene in markets, they cause more problems than they solve.”

With the use of appropriate examples, assess whether governments should intervene in a market. [25]
(government failure)


Q30(a) Explain the term public good, and explain whether public toilets and national defence are examples of public good. [10]
Q30(b) Assess the view that public goods & merit goods should be the major causes intervention within SG in achieving its micro economic goals. [15]
(public goods, merit goods)


Q31. China’s rapid market reforms had created a strong middle class and a burgeoning industrial sector. However, many lower income earners, mired in a polluted environment especially in the mining and industrial areas, are left behind economically.

(a) Explain how income inequality and pollution are causes of market failure. [10m]
(b) Evaluate the possible measures that the Chinese government could adopt to solve these problems. [15m]
(negative externalities, inequity)


Q32(a) Explain why market imperfections may lead to an inefficient allocation of resources. [10m]
Q32(b) Evaluate the policies currently used by the Singapore government to achieve an efficient allocation of resources with market imperfections. [15m] 


Q33. The level of innovation in free markets is not desirable and thus innovation should be solely carried out by the government. Discuss. [25m]


Q34. Discuss whether the free market is the most efficient way of allocation resources in Singapore. [25m]
(Link to answer on allocative efficiency here)


Q35. Globalisation and economic growth has brought about both opportunities and challenges to S’pore. Service related industries which require skilled labour saw healthy growth, while secondary industries which employ unskilled labour were lagging behind and faced with very fierce competition from the region. Some have called for the government to implement minimum wage to address the income inequality between these two groups but others have suggested stepping up efforts to enhance workers’ skills and raising productivity.

(a) Using demand and supply analysis, explain the main cause of income inequality between the skilled and unskilled labour in SG. [10]
(b) Assess the effectiveness of implementing minimum wage to address the problem of income inequality in Singapore. [15]
(Note: This question is a significant overlap with the topic on Market Mechanism:, as it mostly likely overlaps with the concepts of DD, SS, elasticities, price controls, etc.)


Q36. The government should only intervene in the case of public good provision because too much government intervention is undesirable.” Discuss. [25]


Q37 (a) Distinguish between private goods, demerit goods and public goods. [10]
Q37 (b) The police protect the community by deterring and detecting crime as a public service. But the task of guarding specific property like banks and factories is usually left to security firms who charge for such services. Discuss the view that policing services can be left to the private sector. [15]


Q38 (a) Explain why immobility of factors and market dominance may lead to market failure. [10]
Q38 (b) Evaluate the policies used by the Singapore government to correct this market failure (13)


Q39 “The free market is the most efficient way of allocating resources in Singapore”. How far do you agree? [25]
[Information Failure (Merit and demerit goods, asymmetric info), Externalities, Market Dominance, etc]


Q40. Discuss with suitable examples, whether the Singapore government currently adopts the most ideal economic policies in the provision of healthcare / housing / education. (25)
(Policy measure for Externalities, 3M framework for healthcare financing in SG)


Q41. To what extent do you agree that the free market is capable of allocating resources efficiently in the case of air travel and museum visits? [25]


Q42. The Cabinet has decided to develop two Integrated Resorts (IR) in Singapore comprising museums, convention spaces, theme parks and casinos. The Singapore government continues to be involved in the development and operation of the IR, including the building up of infrastructure supporting the IR and controlling access to the casino.”
Adapted from PM Lee Hsien Loong Parliamentary Seating, 18 April 2005

(a) Explain the reasons why the government is involved with the development and operation of the IR. [10]
(b) Assess the view that public goods and merit goods are the major causes of government intervention in Singapore. [15]


Q43. In a market economy, prices act as a rationing device, provide incentives and give signals to producers and consumers. The price mechanism is the best way to allocate resources.

(a) Explain how the rational behaviour of consumers and producers lead to an efficient allocation of  resources.
(b) Critically analyse whether the price mechanism is the best way to allocate resources.


Q44. Assess the view that the Singapore government should use taxes rather than any other economic policies when dealing with the market failure associated with negative externalities. [25]


Q45(a) Explain how the price mechanism allocates scarce resources among competing needs in a free market. [10]
Q45(b) Discuss whether it is necessary for the Singapore government to provide both public and merit goods in order to achieve efficient allocation of resources. [15]


Q46. The 6% tax on soft drinks and the removal of soft drink machines in primary schools aim to tackle the obesity problem and high government spending on healthcare in the US. In response, the American Beverage Association spent millions of dollars on media to mitigate the effect of the tax.

Discuss the economic rationales and effectiveness of the above government measures, [25]


Q47 How far do you agree with the proposition that economic activity of the Singapore government should be restricted to the provision of public goods and control of market dominance within Singapore? [15]


Q48(a) Explain the main types of unemployment in Singapore. [10].

To reduce income inequality, the USA uses a minimum wage law while Singapore believes that improving the skills of workers is the best solution.
Q48 (b) Using economic theory, analyse whether the above view is justified. [15]


Q49 Coal-fired plants produce electricity by burning coal in a boiler to produce steam. In the process, several principal pollutants result from coal such as  sulphur dioxide and nitrogen oxides which contribute to acid rain, haze, and respiratory illnesses.
Source: US EIA

Discuss the view that governments throughout the world should be more involved in the supply of electricity, than the control of reducing pollutants from the process of generating electricity. [25] .



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