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1.8 The market mechanism, market failure and government intervention in markets

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Question 42

An economy's transport and safety infrastructure includes the following:

  • I. I.\,I. A regional street-lighting network.
  • II. II.\,II. A suburban highway that experiences severe congestion during rush hours but has no toll barriers.
  • III. III.\,III. An uncongested toll bridge where drivers are automatically charged electronically via transponders.

Which of the following statements correctly identifies the economic nature of these goods?

A

III and IIIIII are both pure public goods because neither charges a direct user fee; IIIIIIIII is a private good because users can be excluded if they do not pay.

B

III is a pure public good because it is non-rival and non-excludable; IIIIII is a quasi-public good because it is non-excludable but rivalrous during peak hours.

C

IIIIII is a private good because congestion makes it rivalrous; IIIIIIIII is a pure public good because the absence of congestion makes it non-rivalrous.

D

III is a quasi-public good due to its geographical limits; IIIIII and IIIIIIIII are both private goods because they are subject to crowding and direct pricing respectively.

Markscheme

1.8 The market mechanism, market failure and government intervention in markets Questions

  1. A Level
  2. /Economics
  3. /1.8 The market mechanism, market failure and government intervention in markets

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.

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