Market Failure Basics

Which best describes a public good?

• A good provided by the government 
• A good purchased by individuals
• A good that exists only in a free market
• A good that produces no externalites (spillover effects)

A market failure is best described as

• The idea that market forces of supply and demand always provide the maximum benefit for society
• The idea that market forces of supply and demand do not always provide the maximum benefit for society
• The concept that a decision made by one party can have negative effects on another party
• The concept that a decision made by one party can have positive effects on another party

Which is not an example of a public good?

• Street lights

• Local free clinic

• Bottled water

• Defence force

Apartment dwellers who buy fire alarms or fire extinguishers generate a

• negative externality (Spillover effect)

• positive externality (Spillover effect)

Public goods, such as defence, are not supplied by the price system because;

• the capital cost is too high

• the benefits would not be restricted to buyers but would be available to non-buyers as well

• public goods are necessities and therefore cannot be left to the price system

• monopolies would make too large profits

Which of the following does not apply to merit goods and services?

• They provide private and social benefits

• They are limited in supply and require a system of allocation

• They could be paid for by the consumer if a market system was allowed to operate

• They have the characteristic of non-excludability

Public goods are non-rival and non- ?

What does 'non-rival' mean?

• More than one person can use it

• Only one person can use it

• There are direct competitors for a product

• None of the above

Which of the following is not a public good?

• Street Lights

• The Army

• Buses

• Flood Control Systems

Public goods are

• rival and excludable

• non-rival and non-excludable

• rival and non-excludable

• non-rival and excludable