Money-Classification Goods and Service

‘An increase in consumption by one person leaves the benefits available to others undiminished’.

Which good does this statement define?

• Demerit Goods

• Merit Goods

• Private Goods

• Public Goods

What justifies government intervention in the provision of a merit good such as education?

• People who pay for education value it more than those who cannot pay

• Private schools have more merit than state schools

• Social costs of providing education outweigh social benefits of education

• Some consumers do not fully recognize the value of education

Which product is most likely to be provided only by the government?

• national defence

• national health

• national museums

• national theatres

A good’s defining quality is that its consumption by one person prevents its consumption by someone else.

How is this good classified?

• a free good

• a non-excludable good

• a non-rival good

• a private good

Why might governments provide free education for children aged 4 to 16 years old?

• Consumers are not fully aware of the benefits of education

• Education in a free market system would be over consumed

• Education is a public good and there would be many free riders

• The private costs of education exceed the private benefits in a free market

Which is closest to being a public good?

• electricity

• health services

• street lighting

• water supply

What is most likely to decrease if the government pays a subsidy to the producers of a product?

• government spending

• output of the product

• price of the product

• rates of taxation

A government finances its public sector borrowing by selling securities to the non-bank private sector.

What will follow?

• The budget deficit will fall

• The deficit on the current account will increase

• The money supply will rise

• The national debt will increase

Consumers do not use enough of a product to maximize their private benefit because they have imperfect information about the product.

How would an economist classify this product?

• demerit good

• free good

• merit good

• public good

What is a necessary characteristic of a public good ?

• It has a fixed maximum price

• It has an opportunity cost of production of zero

• It is non- excludable

• It is an essential good