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In which of the following situations is market failure least likely to occur? A situation where;

• externalities exist

• many producers compete in the market

• there is a sole producer in market

• there is a very uneven distribution of income and wealth

Which of the following is a characteristic of a merit good?

• It could be provided by the free market, but not in sufficient quantities

• It is always provided free to consumers

• It tends to generate negative externalities, so governments restrict its consumption

• Once the good has been supplied to one consumer, there is no additional cost in supplying it to others

A tin-mining company is found guilty of polluting a river. Which one of the following government measures would an economist describe as an appropriate market-based solution?

• Imposition of regulations and direct control on the company

• A reduction of private property rights over the river

• Increase tax on the tin produced

• Nationalization of the tin-mining company

In which case is market failure occurring?

• Consumers determining what is produced

• Firms producing above the lowest possible cost

• Price falling as a result of a decrease in demand

• Price rising as a result of an increase in costs of production

A merit good is one which:

• has an absence of external benefits

• has higher private benefits than consumers realise

• imposes costs on those who are not involved in its production directly

• is both non-excludable and non-rival

Which type of goods would be over-produced if left to market forces?

• Basic necessities

• Capital goods

• Demerit goods

• Public goods

What is a cause of market failure?

• Competition between firms

• Consumers lacking information about where the lowest prices can be found

• Differences in pay between skilled and unskilled workers

• Resources being both geographically and occupationally mobile

Which is an example of a public good?

• healthcare

• museums

• public fireworks display

• public playgrounds

A government decides to build another airport terminal at an existing airport. This will increase air

and road traffic around the airport but will also increase trade and tourism and create business and

employment opportunities. Which economic concepts are mentioned in the above statements?

• conservation of resources, economic growth, external benefits

• external costs, external benefits, opportunity cost

• external costs, opportunity cost, conservation of resources

• opportunity cost, occupational mobility of labour, geographical mobility

Which is not a characteristic of a merit good?

• over-provided

• under-consumed

• provides social benefits

• under-provided