Cambridge International AS Level · Economics (9708)
5 multiple-choice questions marked as you go, and 3 written questions with worked solutions. All on Classification of goods and services.
A government provides a good that is non-rival and non-excludable. However, because consumers realize they can benefit from the good without paying for it, private firms refuse to supply it. Which classification of goods and which market problem does this scenario describe?
Why does the market often fail to provide public goods, such as national defense, necessitating government intervention?
Which condition must be met for a good to be classified as a free good in the economic sense?
A street lighting system is provided in a city. It is non-excludable and non-rival. However, some residents complain that the light is too bright and keeps them awake. Which characteristic of this public good does this situation highlight?
Why is a merit good, such as secondary education, typically under-consumed in a free market compared to the socially optimal level?
Define the term public good and identify its two essential characteristics that distinguish it from a private good.
Write your answer out first, then check it against the worked solution.
(a) Explain the difference between free goods and private goods (economic goods), providing one example of each. [2]
(b) A government provides street lighting in a residential area. Explain why a private firm in a market economy might be unwilling to provide this service, making reference to the specific characteristics of public goods. [3]
Write your answer out first, then check it against the worked solution.
(a) Distinguish between public goods and private goods by explaining the significance of the terms non-excludability and non-rivalry.
(b) Explain the role of imperfect information in the market for merit goods and demerit goods. Why does this lead to under-consumption and over-consumption respectively?
Write your answer out first, then check it against the worked solution.
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