4.1.8.3 Public goods, private goods and quasi-public goods Quiz: AQA Economics, Unit 1

The 20 questions

1. Which two characteristics define a pure public good?

   • Non-rival consumption and excludability, so the good is shared at no extra cost but sellers can still prevent some users from access.
   • Rival consumption and excludability, so each unit can be used by only one person and sellers can charge each user a separate price.
   • Rival consumption and non-excludability, so the good is used up when consumed and everyone can use it at no cost to them.
   • Non-rival consumption and non-excludability, so one person's use does not reduce availability and no one can be prevented from using it.

2. Which of the following is a private good?

   • A street lamp, because its light is available to everyone walking past and it is impossible to exclude pedestrians.
   • A television broadcast, because viewers can all watch it at once without reducing the picture available to others.
   • A sandwich, because one person eating it means it cannot be eaten by someone else, and sellers can charge for it.
   • National defence, because every citizen is protected at once and no one can be excluded from its benefits.

3. What is the free-rider problem?

   • People can enjoy a non-excludable good without paying for it, so the market under-supplies the good because payment is not made.
   • Consumers who buy a good in bulk receive a discount, so they pay less per unit than consumers buying single items.
   • Firms that are given government subsidies can charge customers a lower price than competitors in the same industry.
   • Workers who join a trade union receive higher wages without paying any subscription fees to the union at all at the time in question.

4. Why does the free-rider problem typically lead to market failure for public goods?

   • Public goods are always over-supplied by private firms, because free riders increase demand and so raise the output of firms.
   • Private firms always charge too high a price for public goods, so consumers buy too little of them in every market.
   • Public goods are supplied efficiently by the market, because the free-rider problem removes the need for any payment at all.
   • Private firms cannot earn revenue from non-payers, so they do not supply the good at the socially optimal level of output.

5. Which good is most likely to be a quasi-public good?

   • A public park with fenced entry and paid tickets, which is fully rival and excludable in every respect at all times.
   • A private car, because each car is used by only one household at a time and can be sold to a single buyer under the conditions described.
   • A loaf of bread, because each loaf is consumed by one person and its supply is limited by production costs.
   • Pay-TV broadcasting, where the signal can be encrypted and so excluded, but its consumption is still non-rival once it is broadcast.

6. Which of these is an example of technological change making a good excludable?

   • Television broadcasting, which can now be encrypted so that only paying subscribers can receive the signal.
   • Television broadcasting, which has become a fully rival good because each additional viewer uses up the signal's bandwidth.
   • National defence, which has become excludable because satellite technology now allows the state to block foreign attacks.
   • Street lighting, which has become non-excludable because new technology allows every passer-by to be charged by the metre.

7. Which is a tragedy of the commons?

   • Excessive saving by households, because individuals keep their money in banks and so reduce the amount spent in shops.
   • Underuse of a private good, because owners keep their property locked up and never sell any of it to other buyers in the case described.
   • Overuse of a shared resource, such as common fishing grounds, because each user takes more than would be sustainable for all.
   • Over-provision of a merit good, because governments always subsidise goods that they regard as beneficial for citizens.

8. A fish stock in an open sea can be depleted by use, yet no fishing fleet can be prevented from using it. What type of resource is this?

   • A quasi-public good, because the owners of the fishing rights can exclude others from the stock at no cost to themselves.
   • A pure public good, because its use by one fishing fleet does not reduce the stock available to any other fishing fleet.
   • A common access resource, because it is rival in use and yet non-excludable, so overuse is likely.
   • A pure private good, because each fish caught becomes the property of the fleet that catches it in the open sea.

9. Which statement describes a pure public good correctly?

   • Once it is provided, it can be enjoyed only by those who paid for it, and each unit is used up by its first consumer.
   • Once it is provided, nobody can be prevented from enjoying it, and one person's enjoyment does not reduce that of others.
   • Once it is provided, its benefits are shared only by the owner, because the owner can exclude others at no cost to themselves.
   • Once it is provided, its consumption falls as more people use it, because crowding always reduces the benefit for each user.

10. A town council builds a bridge that anyone can walk across at no charge. Which characteristic does the bridge most clearly show?

    • Private ownership, because the council keeps the bridge for its own use and charges a fee only to large vehicles in the case described.
    • Excludability, because the council can choose which pedestrians are allowed to cross the bridge at any given time.
    • Rivalry, because each pedestrian who crosses uses up part of the bridge so that it is unavailable to the next person.
    • Non-excludability, because no one can be prevented from using the bridge once it has been built and is open to the public.

11. Which is a reason a public good may be partly provided by the private sector?

    • The government is legally prohibited from providing public goods, so the private sector always fills the gap in every case.
    • Public goods are always rival, so each unit can be sold to a single customer at a price that covers the cost of supply.
    • Technological change can make the good excludable, so a firm can charge users and recover the cost of providing it.
    • Private firms gain no benefit from public goods, so they always provide them at the socially optimal level of output.

12. Which of the following is a non-rival good?

    • A seat in a theatre, because each seat can be occupied by only one person during each performance of a show.
    • A tank of petrol, because the fuel is used up by the driver and cannot be used by any other driver afterwards.
    • A cake, because each slice eaten by one guest is no longer available to any other guest at the same party during the period under review.
    • An encrypted broadcast that is watched by many subscribers at once without reducing the picture quality available to others.

13. Why does the market for a pure public good often fail to produce the socially efficient quantity?

    • The marginal social benefit of the good is the sum across all users, but no firm can capture all of that benefit as revenue.
    • Consumers always pay the full value of a public good, so the price they pay reflects the social benefit of each unit.
    • Public goods have zero benefit to users, so the efficient quantity is always zero and the market correctly supplies none.
    • The marginal social benefit equals the marginal private benefit, so firms always supply exactly the efficient quantity.

14. Which of these is an example of a common resource rather than a public good?

    • A national radio broadcast, which can be heard by any listener without reducing the sound available to other listeners.
    • A shared fishing ground that can be depleted by overfishing, as one fisher's catch reduces stocks available to others.
    • A lighthouse that warns all ships at sea without any reduction in the warning given to other ships in the area.
    • Clean air in a national park, which can be enjoyed by all visitors without any reduction for other visitors on the day.

15. Which evaluation point weakens the case for government provision of all public goods?

    • Government provision avoids all free-riding, because the state is able to exclude any person from enjoying a public good.
    • Government provision always guarantees the efficient quantity, because the government can observe the true benefit of each citizen.
    • Government provision may still be inefficient, because it can have inadequate information on the value people place on goods.
    • Government provision is always cheaper than private provision, because the government has no costs of administration at all.

16. A public good is partly excludable through a membership scheme. Which best describes it?

    • A pure private good, because membership creates full rivalry so that each member uses up a separate share of the good.
    • A pure public good, because membership has no effect on whether the good is excludable for non-members of the scheme.
    • A common resource, because membership gives each member full property rights over the good and its use in every case.
    • A quasi-public good, as it has some features of a private good while still being non-rival for members who use it.

17. Which statement about a lighthouse as a public good is most accurate?

    • It is excludable, because the owner can switch off the light for ships that have not paid harbour dues in advance.
    • It is rival, because each ship that sees the light uses up part of its signal so that the next ship sees less of it.
    • Its light can be seen by every ship at once, and it is difficult to charge individual ships for the warning it gives.
    • It is a private good, because a single owner profits from every ship that uses the harbour in each season of the year.

18. Which feature of a good makes it most likely to be under-provided by a free market?

    • High non-excludability, so that many people benefit from the good but few are willing or able to pay for it.
    • Sale to only one buyer at a time, so that the price paid covers the full cost of producing each unit of the good.
    • Supply by a single seller who charges a price equal to marginal cost, so that the seller earns no supernormal profit.
    • High excludability and rivalry, so each buyer pays a price that reflects the full value of each unit consumed by them.

19. For a pure public good, the marginal cost of supplying one more user is:

    • Infinite, because each new user requires a separate supply of the good to be produced in full by the firm concerned.
    • Equal to the average cost of production, because each new user raises total cost by the same amount as the average.
    • Zero, because an additional user does not reduce the amount of the good available to existing users.
    • Equal to the price charged to that user, because firms set the price to match the cost of each extra consumer.

20. Which situation is most likely to involve a free-rider problem?

    • Car repairs, where each motorist pays a fixed fee for each service carried out on their own vehicle in the garage.
    • Hairdressing services, where each customer pays the stylist directly for a cut and style at the point of sale.
    • Street cleaning in a town centre, where residents enjoy clean streets without paying for the service directly themselves.
    • Bakery goods, where each loaf sold is paid for at the counter by the buyer before they leave the shop over the period concerned.

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