Cambridge International A Level · Economics (9708)

Classification of goods and services: Practice Questions

5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on Classification of goods and services.

10 questions26 marksFree, no account

Question 1

1 mark

Which combination of characteristics correctly describes a street light provided by the government?

Question 2

1 mark

Which statement best explains why a merit good, such as a preventive vaccination, is typically under-consumed in a free market economy?

Question 3

1 mark

Why does a market economy typically under-provide merit goods such as vaccinations and education?

Question 4

1 mark

What are the two defining characteristics of a pure public good?

Question 5

1 mark

A good is characterized by non-excludability and non-rivalry in consumption. Another good is provided by the state because individuals, due to imperfect information, fail to realize the full private benefits of consuming it.
What is the correct classification for these two goods respectively?

Question 6

2 marks

Define a free good and explain why its consumption does not involve an opportunity cost.

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Question 7

4 marks

Distinguish between merit goods and private goods by specifically analyzing how information failure leads to a difference between their actual consumption levels and their socially optimal levels.

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Question 8

4 marks

Explain how imperfect information leads to the under-consumption of merit goods in a market economy.

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Question 9

4 marks

(a) Define the terms merit goods and demerit goods.
(b) Explain why merit goods are typically under-consumed in a free market economy due to information failure.
(c) Provide one specific example of a merit good and one example of a demerit good.

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Question 10

7 marks

(a) Distinguish between public goods and private goods by analyzing the characteristics of excludability and rivalry.
(b) Discuss the extent to which the 'free-rider problem' results in the total non-provision of public goods in a pure market system, and explain how a government can resolve this market failure.

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