Lesson 4.1.8.5
4.1.8.5 Merit and demerit goods Quiz: AQA Economics, Unit 1
20 questions
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Lesson 4.1.8.5, Merit and demerit goods: 20 multiple choice questions for the AQA Economics (7136), Unit 1: Individuals, firms, markets and market failure, written with Revision Ninja.
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The 20 questions
-
Which feature characterizes the consumption of a merit good in a free market?
- Optimal consumption
- Under-consumption
- Zero consumption
- Over-consumption
-
Which of the following goods is classified by economists as a demerit good?
- Education
- Street lighting
- Healthcare
- Tobacco
-
The classification of a product as a merit or demerit good depends on what?
- Value judgements
- Income elasticities
- Market prices
- Production costs
-
For a good with positive consumption externalities, how does social benefit compare to private benefit?
- Social benefit higher
- Social benefit lower
- Benefits are equal
- Private benefit zero
-
Why does imperfect information lead to the under-consumption of merit goods?
- Benefits overestimated
- Benefits underestimated
- Costs underestimated
- Prices set high
-
Why does imperfect information cause consumers to over-consume demerit goods?
- Harms underestimated
- Benefits underestimated
- Prices set low
- Harms overestimated
-
Which government intervention is directly used to encourage the consumption of merit goods?
- Price ceilings
- Subsidies
- Indirect taxes
- Demerit tariffs
-
Which policy is most commonly implemented to reduce the consumption of demerit goods?
- Indirect tax
- Price floor
- Production grant
- State subsidy
-
Price rises by 20% and quantity demanded falls by 20%. What is the price elasticity of demand?
- Inelastic
- Perfectly inelastic
- Unit elastic
- Perfectly elastic
-
If private benefit is £5 and external benefit is £3 per unit, what is total social benefit?
- £5 per unit
- £8 per unit
- £15 per unit
- £2 per unit
-
What market outcome occurs for a demerit good in an unregulated free market?
- Over-consumption
- Productive efficiency
- Allocative efficiency
- Under-consumption
-
What is a major drawback when a government provides a merit good free of charge?
- Higher market prices
- Excess supply
- Productive efficiency
- Excess demand
-
Why might an indirect tax on a demerit good be criticised on equity grounds?
- It increases efficiency
- It subsidises producers
- It is regressive
- It is progressive
-
Which unintended consequence often results from completely banning a demerit good?
- Lower enforcement costs
- Black markets
- Excess supply
- Tax revenue gains
-
Which of the following is a classic example of a merit good?
- Cigarettes
- Petrol
- Alcohol
- Healthcare
-
How are merit goods allocated in an unassisted free market?
- Under-consumed
- Allocatively efficient
- Over-consumed
- Productively efficient
-
Why is an indirect tax on sugary drinks often criticised as regressive?
- Harms low incomes
- Lowers retail prices
- Taxes firm profits
- Benefits high incomes
-
If marginal private benefit is £6 and marginal external benefit is £2, what is marginal social benefit?
- £8
- £6
- £12
- £4
-
Why might an information campaign fail to reduce demand for a demerit good?
- High price elasticity
- Consumer addiction
- Perfect information
- Falling production costs
-
What is a key advantage of issuing vouchers for merit goods over direct state provision?
- Preserves consumer choice
- Guarantees equal consumption
- Prevents private supply
- Eliminates government spending
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