Assignment 10: Market failure – Externalities

The existence of externalities is our second cause of market failure.  As you found out in the lesson, this is not an easy topic!  Remember that preparation for tutorials  is equally as important as completing written assessments.  Review the topic of externalities using your notes and PLN. Ensure your summary notes focus on the following:

  • Definitions, explanations and examples of key terms: externalities (both positive and negative), property rights, private and social costs and benefits, social efficiency etc)
  • Ensure you understand the policies government use to correct market failures caused by externalities – pollution taxes, regulation, emissions trading, subsidies.
  • Complete the multiple choice paper we started in class, AFTER you have done the above!
  • Complete the data response paper – use the targets from the last paper to help you improve.

Exam preparation

Complete the multiple choice exam paper you were given on Wednesday – all questions.  Bear in mind that you may need to read ahead/research on areas we havent covered yet.

Wider economic understanding

  • There are two TV programmes I would like you to watch – both are available on iPlayer if you missed them. The first is Nick Robinson’s ‘Your money and how they spend it’, originally shown on Wednesday evening.  This is ESSENTIAL VIEWING!  The other is Ian Hislop’s ‘When bankers were good’.
  • Keep up to date with your reading via the Economist, the news stories I retweet and your reading book


In next Tuesday’s lesson we will have a short factual test on the topic of market failure so far (efficiency, productivity, economies of scale, monopoly, externalities).

I would also like you to undertake some focused research on the application of externality theory. You are to find and print at least recent article, from a reputable source, relating to the following:

  • Denmark’s ‘fat tax’ and whether it would work in the UK
  • Ireland’s plastic bag tax
  • Scotland’s decision to put a minimum price per unit on alcohol
  • The UK government’s plans for a ‘carbon floor price’

The overall question we will look at in our debate in the lesson will be whether governments should intervene in markets where externalities are present and the different ways this might be done.



3 thoughts on “Assignment 10: Market failure – Externalities

  1. Grace

    I’m really struggling with the essay part to the data response question. I’m not exactly sure what the answer has to include so please may I have some guidance?

  2. Alexandra Hall

    I am struggling with the data response question that you set us last lesson I don’t really understand the terms and what the question,especially the last, is looking for. Please can I have some advice at what i am meant to put in the answers?


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