CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: COURSEBOOK ANSWERS

Exam-style questions and sample answers have been written by the authors. In examinations, the way marks are awarded
may be different.

Coursebook answers
Chapter 6
Economics in context
Learners’ discussion might include:
• Fire and rescue services are provided free and are paid for out of tax revenue
• Funding could be levied locally or nationally or a combination of both. Some services may result in a
charge being made, for example attendance after a road accident, to deal with a loss of fuel or spillage
of a load from a freight vehicle. There may be considerable variation in how the service is funded
and what is chargeable to users of services. The feasibility of charging for all services is unlikely and
impractical; exceptions could be made where non-life threatening services are used, say, by private
sector businesses, for example a routine fire safety check in a factory.

Activities
Activity 6.1
1 and 2 Possible suggested learners’ answers are shown in italics:
Rival and excludable: chocolate bar; satellite television dish; takeaway food; ticket for cinema.
Rival and non-excludable: public park, public cricket pitch; sandy beach; cycle route.
Non-rival and excludable: toll road; public swimming pool; museum with paid-for ticket entry.
Non-rival and non-excludable: firework display; street lights; local police force.
3 Learners’ discussion might include:
• Problem of public goods that are not ‘pure’. These are called quasi-public goods. These goods are
excludable because consumers must pay a charge to use them even though they are provided for
the public by the public sector.
• Another set of examples of quasi-public goods are goods that are non-excludable but could be
rival if too many people want to use them at the same time.
• Examples can be compared and discussed in terms of the two characteristics of public goods.
• There should be no issue with private goods.

Activity 6.2
Learners’ own answers. Possible suggested answers might include:
1 Consumption of high-sugar energy drinks:
a Recent feature in college newsletter on health issues due to over-consumption.
b Written by someone who is not an expert; assumes all such drinks have the same sugar content.
c Many students may ignore the health warnings.

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: COURSEBOOK ANSWERS

2 Over-consumption of junk food:

a Public service information and social media posts.
b No cause to doubt the information.
c Growing obesity in young adults which can lead to health problems.

Activity 6.3
Learners’ discussion might include:
Merit goods: compulsory secondary education, wearing a seat belt, emergency health services, visiting
a museum
Demerit goods: Chewing gum is a demerit good when discarded in an anti-social way; chewing gum that
is sugar-free may be a merit good if it is used to clean teeth. Playing loud music and shouting at a cricket
or football match is a demerit good where the noise is unwanted and reduces spectators’ enjoyment; it may
be a merit good if the music and shouting add to the atmosphere and the spectators’ experience. In some
cases, a good can be either a demerit good or a merit good depending on personal opinion.

Activity 6.4
Learners’ possible answers might include:
1 Public goods: traffic lights, flood defences, roads, police. Merit goods: vaccinations, public hospitals,
student bursaries.
2 Some but not all roads could be provided as private goods. It may not be practically possible in
other cases.
3 Much will depend on whether a government feels that more people can afford to pay for private sector
healthcare. There may be reduced funding of merit goods if a government is facing serious debt
problems.

Think like an economist

Learners’ discussion might include:
1 The reasons for funding could be historical since many roads were built with public funding. Variations
between countries may depend on the extent that fuel is taxed; a high rate of fuel tax usually generates
funds for road maintenance and construction; funding may be a function of the priorities in the
government’s budget; there is a possibility of external funding.
2 Singapore’s ERP system is unique in the way it funds roads:
• A charge is paid by drivers when vehicles are used within a designated area;
• The charge depends on the time of day, the volume of traffic and time spent in the designated area;
• Revenue from the ERP is also used to subsidise a mass transit system;
• There are measures in place to make it expensive for residents to own a car;
• It is not easy to copy such a system elsewhere although there have been experiments in other cities.

Exam-style questions: Multiple choice

1 B A pure public good is one which is non-excludable and non-rival. This therefore rules out A
where consumption is rival. A pure public good can be produced by the government although
the government can produce many other types of goods and services. This excludes C. A pure
public good is free of charge at the point of use but this can also apply to other goods such as
an art gallery which is funded by the government. This excludes D. B includes reference to non-
excludability which is one of the two characteristics of a pure public good.

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: COURSEBOOK ANSWERS

2 B A merit good is so-called because of the positive effects its consumption has for the individual
and for the community. A refers to demerit goods and is therefore incorrect. C could apply to
merit goods but governments also fund public goods and so C is therefore not the correct option.
D implies that the consumption of merit goods is restricted which is not always true. B states the
main reason for the provision of merit goods due to information failure.
3 A A demerit good is so-called because it is over-consumed and over-produced in the market. B refers
to merit goods and not demerit goods. C is not possible given the nature of demerit goods. D is
true of demerit goods but it is also true of all goods that are purchased in the market.
4 C Since the museum charges an entry fee, this means that it is possible to exclude anyone who does
not pay the fee. This rules out A and B. With ‘very few visitors’, anyone paying the charge will be
admitted. So, D, ‘rival’ is not valid.
5 A A merit good is where there is under-consumption due to information failure. B, cigarettes, is a
demerit good with over-consumption. C is a public good while D is a private good.
6 C Vaccination against polio has positive effects for the individual and community/economy since it
reduces the spread of this disease. D is therefore irrelevant in terms of the question. A could be
applicable but is not essential to match the characteristics of a merit good. B is true but again has
no link to a merit good’s characteristic of being under provided due to information failure.

3 Cambridge International AS & A Level Economics - Bamford & Grant © Cambridge University Press 2021