Historically, over-the-air television broadcasts were funded by governments or license fees because they were non-excludable. The development of encrypted digital satellite signals and subscription smartcards has allowed broadcasters to restrict access to paying customers.
Which of the following correctly describes the economic impact of this technological change on the nature of television broadcasts?
The television broadcast has transitioned from a public good to an excludable club (quasi-public) good, allowing private firms to overcome the free-rider problem.
The television broadcast has become fully rival in consumption, meaning that one subscriber's viewing now reduces the availability of the signal to other households.
The television broadcast is now classified as a pure private good, eliminating the market failure associated with positive externalities.
The television broadcast has become a merit good, meaning that private subscription pricing will automatically result in the socially optimal level of consumption.
378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.