The table below shows the marginal private and external benefits and the marginal private and external costs of a product at the free market equilibrium level of output.
| £ | |
|---|---|
| Marginal private benefit | 15 |
| Marginal external benefit | 0 |
| Marginal private cost | 15 |
| Marginal external cost | 8 |
Government intervention in this market could improve the allocation of resources because the product is most likely to be
a public good.
a demerit good.
a normal good.
a merit good.
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.