What is non-excludability?

It is impossible to prevent other people from gaining access

Non-rivalry refers to the fact that, once a good is provided...

My use does not reduce the amount that you can consume

What does AD Valorem tax mean?

An indrect tax expressed as a % of the $ of a product Eg VAT

What is a negative consumption externality associated with chewing gum?

discarded chewing gum on pavements

A government decides to replace a private company with its own to collect household waste. This might be justified if

Private companies might put profits before customer needs.

The amount of training undertaken in a mixed economy is not socially optimal. What could explain this?

The individual’s benefit from training is less than the benefit to society.

Negative externalities in consumption results in market failure. This is because at the free market equilibrium

marginal social benefit is less than the marginal private benefit

What does box A+B represent?

Amount of revenue received by the government

What does box B represent?

Burden of tax paid by the producer

The generation of electricity by coal-fired power stations causes external costs. Who bears these external costs?

the people living in the area where the electricity is generated

An essential characteristic of a public good is that it is non-excludable. This means that

People could consume the good without paying for it.

Junk food creates negative externalities of consumption because

Eating too much could create health costs for tax-payers

Which of the following would be the most appropriate to tackle the market failure associated with alcohol consumption?

An increase in duty on alcoholic beverages

Which one of the following statements referring to a market economy is correct?

Prices do not always reflect external costs.

What does box C+D represent?

Dead Weight Welfare Loss - lost benefit to society

How can you tell the amount of tax that has been placed on the product or service?

The distance between the two supply curves

Fixed price by the Government at a higher level than the equilibrium

In the context of public goods, what does "non-rivalrous" mean?

Consumption by one person does not affect others

What does box A represent?

Burden of tax paid by the consumer

Money provided by the government to help reduce costs

What is moral hazard?

A person insuranced more likely to take risk

Which would be treated as an external cost arising from the growing volume of cars on Britain's roads

Higher prices in shops due to increased costs of transportation

What is Moral Hazard?

One party has more information after a signed contract

How would you describe the social optimum point?

Marginal Social Cost = Marginal Social Benefit

What is a moral hazard?

people act more recklessly when protected from risk which hurts the company

How would you describe the free market point?

Supply = Demand, Marginal Private Cost = Marginal Private Benefit

What is market failure?

When the allocation of goods and resources is inefficient.

If Good X is produced in a free market, which ignores externalities, then without intervention there is likely to be

negative externalities of JK on the last unit produced.

The incidence of a tax

refers to those who bear the most burden of taxation

What is implied by the existence of a negative externality?

There is a divergence between private and social costs

Define Asymmetric Information

When one party has more information than the other

Negative externalities from Waste Disposal?

Landfill = damages the ground, Landfill = negative for people who live near by

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1.3 Market Failure - Edexcel Economics + Public Goods and Market Failure | A Level Economics +

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Combining market failure questions

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Questions 52

Answers

1
What is non-excludability?
It is impossible to prevent other people from gaining access
Sold only at one store
One person’s use does not diminish other people's use
It is possible to prevent other people from gaining access
2
What is classified as a public good by economists?
government-run national parks
government-funded hospitals
flood defences
the internet
3
What does box C represent?
Burden of tax paid by the producer
Burden of tax paid by the consumer
Amount of revenue received by the government
Lost consumer surplus
4
Non-rivalry refers to the fact that, once a good is provided...
My use does not reduce the amount that you can consume
No-one can be prevented from benefitting from it
My use reduces the amount available to you
The good faces an upward sloping supply curve
5
What does AD Valorem tax mean?
Produced means of productions (Tools, machines,equipment)ETC
All of the above
any type of tax applied to a product
An indrect tax expressed as a % of the $ of a product Eg VAT
6
What is a negative consumption externality associated with chewing gum?
discarded chewing gum on pavements
better dental hygiene from chewing gum
costs of the ingredients in chewing gum
smells from chewing gum factories
7
Which of these goods or services is completely non-rival in consumption?
Free school lunches
The National Health Service
A public drainage system
The state education service
8
What does box D represent?
Lost consumer surplus
Burden of tax paid by the consumer
Amount of revenue received by the government
Lost producer surplus
9
If you drive a car, external costs are imposed on other people who live in the city such as
Cost of petrol
Cost of car insurance
Congestion
Air pollution
10
A good that is non-exclusive and non-rivalry
Merit goods
Public goods
Demerit goods
Invisible goods
11
Asymetrical information is likely to ________ resource allocation
Distort
Remove
Promote
12
A government decides to replace a private company with its own to collect household waste. This might be justified if
Private companies are always less efficient than government companies.
Costs of waste collection are bound to be lower if paid out of local taxes.
Private companies might put profits before customer needs.
Because waste collection is a public good.
13
The amount of training undertaken in a mixed economy is not socially optimal. What could explain this?
In a mixed economy training is a public good.
Experienced educators are a scarce resource.
Training is a large variable cost for firms.
The individual’s benefit from training is less than the benefit to society.
14
Which of the following goods is characterized by non-rivalry and non-excludability?
fish in the ocean
tornado siren
city streets
satellite radio
15
What is consumer surplus with the subsidy?
A + B + C
A + B
A + B + C + F
A + B + C + F + G
16
Negative externalities in consumption results in market failure. This is because at the free market equilibrium
marginal social cost is less than the marginal private benefit.
marginal social benefit is less than the marginal private benefit
marginal private cost is greater than the marginal social cost.
marginal private benefit is greater than the marginal private cost
17
What does box A+B represent?
Burden of tax paid by the consumer
Burden of tax paid by the producer
Amount of revenue received by the government
Lost consumer surplus
18
What does box B represent?
Burden of tax paid by the consumer
Lost consumer surplus
Amount of revenue received by the government
Burden of tax paid by the producer
19
The generation of electricity by coal-fired power stations causes external costs. Who bears these external costs?
the people living in the area where the electricity is generated
the government that subsidises the production of electricity
the distributors who sell the electricity
the electricity company that produces the electricity
20
An indirect tax is one that...
consumers pay to local government via the central government
consumers pay on what they buy
consumers pay on what they receive as income
comsumers pay on all imported goods
21
If there are negative production externalities, a misallocation of resources is likely to occur because
market output is too low.
there is overproduction of JH.
market price is too high.
there is underconsumption of JH.
22
An essential characteristic of a public good is that it is non-excludable. This means that
Public goods are of equal benefit to all consumers
The government should not levy a tax for providing public goods.
There is no opportunity cost in the provision of public goods.
People could consume the good without paying for it.
23
Junk food creates negative externalities of consumption because
Eating too much will create health issues for the consumer
Eating too much will make you fat
Eating too much could create health costs for tax-payers
Junk food can be addictive
24
Which of the following would be the most appropriate to tackle the market failure associated with alcohol consumption?
A reduced minimum price per unit of alcohol
A legally enforced maximum price for alcohol
Higher spending on A&E departments
An increase in duty on alcoholic beverages
25
Which one of the following statements referring to a market economy is correct?
Prices do not always reflect external costs.
Monopolists take no account of consumer preferences.
Large firms are more efficient than small firms.
Efficiency is always indicated by high profits.
26
What does box C+D represent?
Dead Weight Welfare Loss - lost benefit to society
Amount of revenue received by the government
Lost producer surplus
Burden of tax paid by the producer
27
How can you tell the amount of tax that has been placed on the product or service?
Dead Weight Welfare Loss
The distance between the two supply curves
Lost producer surplus
The distance between the two demand curves
28
A price floor is a
Fixed price by the Government at a lower level than the equilibrium
A level of income giving a minimal standard of living
Fixed price by the Government at a higher level than the equilibrium
Price set by the dominate firm in an industry
29
Which is closest to being a pure public good?
electricity
health services
street lighting
water supply
30
What term describes a situation where a person can be prevented from using a good if they do not pay for it?
Free rider
Non-rivalrous
Missing market
Excludability
31
Subsidies may encourage firms to be inefficient and they come to rely on subsidy rather than improve efficiency
Disadvantage of Subsidy
Advantage of Subsidy
Disadvantage of Indirect Tax
Advantage of Indirect Tax
32
In the context of public goods, what does "non-rivalrous" mean?
Consumption by one person reduces the amount available for others
Consumption by one person does not affect others
Consumption by one person increases the amount available for others
Consumption is limited to a specific group
33
Which is the social optimum?
B
A
C
None of the above
34
Market failure happens it is not possible for firms to withhold products from consumers who refuse to pay. This is
The free rider problem
The tragedy of the commons
Rational economic decisions by consumers
Asymmetric information
35
What does box A represent?
Burden of tax paid by the consumer
Burden of tax paid by the producer
Lost consumer surplus
Amount of revenue received by the government
36
What is a subsidy?
Money provided by the government to help increase costs
Maximum price for a good established by the government
Minimum price for a good established by the government
Money provided by the government to help reduce costs
37
What is moral hazard?
A person claiming on someone's insurance
A person who doesn't have insurance
A person insuranced more likely to take risk
A person insured less likely to take risks
38
Which would be treated as an external cost arising from the growing volume of cars on Britain's roads
The cost of car purchase and replacement
The costs of purchasing fuel
Depreciation of car values due to car mileage
Higher prices in shops due to increased costs of transportation
39
What is Moral Hazard?
Ethics being harmed when making a contract
One party has more information after a signed contract
When one party has a moral duty to protect
Responsibility to protect is not being respected
40
Marginal social benefits of vaccinations exceed the marginal private benefit
False
True
41
How would you describe the social optimum point?
Marginal Social Cost = Marginal Private Cost
Marginal Social Cost = Marginal Social Benefit
Supply = Demand
Marginal Private Cost = Marginal Private Benefit
42
What is a moral hazard?
people act more cautiously when risk is not a factor
people act more recklessly when protected from risk which hurts the company
people act recklessly when not protected from risk which helps the company
the company doesn't have to worry about financial risks
43
How would you describe the free market point?
Marginal Social Cost = Marginal Private Cost
Supply = Demand
Marginal Private Cost = Marginal Private Benefit
Marginal Social Cost = Marginal Social Benefit
44
What is market failure?
When there are not economies of scale.
When there is a 3-firm concentration ration of 95%.
When the allocation of goods and resources is inefficient.
When everyone has perfect knowledge about the market.
45
Which of the following defines a negative externality?
MSC > MSB
MPC > MSC
MSC > MPC
MSC < MPB
46
If Good X is produced in a free market, which ignores externalities, then without intervention there is likely to be
negative externalities of JK on the last unit produced.
underconsumption of NL.
overpricing of EF.
positive externalities of GH on the last unit produced
47
The incidence of a tax
is a benefit
is a tax paid by self-employed workers
refers to those who bear the most burden of taxation
is a special tax on individuals with high income
48
What is implied by the existence of a negative externality?
Output is below its socially optimum level
Individuals are not the best judges of their own well-being
There is a divergence between private and social costs
Producers are not always seeking to maximise profits
49
A maximum price results in a
surplus
allocative efficiency
shortage
some CS transferring to PS
50
Define Asymmetric Information
When consumers take advantage of producers
When one party has more information than the other
When producers take advantage of Consumers
A state of perfect information
51
Negative externalities from Waste Disposal?
Landfill = damages the ground
Landfill = negative for people who live near by
Government encourage more recycling of waste
Recycling waste
52
What is a necessary characteristic of a public good?
It is an essential good.
It has an opportunity cost of production of zero.
It is non-excludable.
It has a fixed maximum price.

1.3 Market Failure - Edexcel Economics + Public Goods and Market Failure | A Level Economics + Flashcards | StudBud