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1) Which of the following is an example of an external benefit of increased train travel? a) Increased overcrowding on trains b) Reduced fares for train passengers c) Reduced congestion on roads d) Higher profits for train operating firms 2) What is a pure public good? a) A product that confers benefits on consumers which are greater than they themselves realise b) A product that involves no external benefits or external costs c) A product that involves no opportunity cost to produce it. d) A product which when consumed by one person does not reduce the amount of the product available for others and which can be charged for directly. 3) What does the existence of external costs suggest? a) External benefits also exist b) Output is higher than the socially optimum level c) Social costs are less than private costs d) The product should be subsidised 4) What is a free rider problem? a) People avoiding paying fares on public transport b) People who would have paid higher fares benefiting from government subsidies to producers of public transport c) Public goods being non-excludable d) public goods being non-rival 5) What is a defining characteristic of a private good? a) It is non-rival so that when a unit is consumed by one individual, it is available to others b) It is possible to exclude non-payers from consuming it c) It is produced only by private sector firms d) It provides only private benefits

quiz on government intervention

by Jbaptista


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