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

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Question 17

Which of the following best describes a demerit good, such as high-sugar energy drinks, in a free market?

Non-rival and non-excludable, where marginal social benefit ( $M S B$ ) exceeds marginal private benefit ( $M P B$ ), leading to underconsumption.

Rival and excludable, where marginal private benefit ( $M P B$ ) exceeds marginal social benefit ( $M S B$ ), leading to overconsumption due to information failure.

Rival and non-excludable, where marginal social cost ( $M S C$ ) is equal to marginal private cost ( $M P C$ ), leading to market efficiency.

Non-rival and excludable, where marginal social cost ( $M S C$ ) is less than marginal private cost ( $M P C$ ), leading to underprovision.

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

A Level
Economics
1.8 The market mechanism, market failure and government intervention in markets

A Level
Economics AQA
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