Exam-style question
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Which option gives the strongest AQA Economics reasoning for The market mechanism, market failure and government intervention in markets? Variation 1: Explain AQA section 3.1.8.4 Positive and negative externalities in consumption and production.
- A.Define externalities, apply it to the market context, explain the cause, transmission mechanism and effect, then judge why the result depends on context.
- B.Government intervention always removes market failure with no trade-off.
- C.A tax shifts demand rather than affecting supply incentives and costs.
- D.Give a definition of externalities only, without application, chain of analysis, evaluation or judgement.
Model answer
What a good answer should say
- 3.1.8.4 Positive and Negative Externalities in MCQ 1: The correct answer is Define externalities, apply it to the market context, explain the cause, transmission mechanism and effect, then judge why the result depends on context...
- This choice fits the microeconomic market analysis required by the learning objective.
Explanation
Why this works
3.1.8.4 Positive and Negative Externalities in is tested here through the prompt: "Which option gives the strongest AQA Economics reasoning for The market mechanism, market failure and government". The correct option is "The correct answer is Define externalities, apply it to the market context, explain the cause, transmission mechanism and effect, then judge why the result depends on context.." because it keeps the answer anchored to Positive and Negative Externalities in rather than a nearby misconception.
The reasoning chain is: define the concept, apply it to Individuals, firms, markets and market failure, identify the economic mechanism, and check the consequence against consumer surplus, producer incentives, efficiency and equity. A tempting distractor usually confuses a change in demand with quantity demanded, analysis with evaluation, or a short-run effect with a long-run judgement.
For AQA Economics 7136, the best choice is the one that preserves the cause, transmission mechanism and consequence without adding an unsupported policy claim.
Common mistake
No common mistake is linked to this question yet.