The government currently subsidises public bus travel for low-income households in rural areas. This service is provided at fares below the free-market rate. Which one of the following provides an economic justification for these subsidies?
The unequal distribution of income and wealth caused by the free market results in an unsatisfactory allocation of resources.
Subsidising bus fares directly reduces inequalities in the distribution of inherited wealth.
Bus travel in rural areas is a pure public good because it is both non-rival and non-excludable.
There is complete market failure in rural transport due to the existence of missing markets.
76 exam-style questions on AQA A Level Economics 1.7 The distribution of income and wealth: poverty and inequality (A-level only), covering 1.7.1 The distribution of income and wealth, 1.7.2 The problem of poverty, and 1.7.3 Government policies to alleviate poverty and to influence the distribution of income and wealth. Each one has a worked solution and a mark scheme showing where the marks go.