These are original Marlbridge practice questions, not past exam questions. The mark points are a suggested Marlbridge rubric to help you check your work; they are not an official scoring guideline. All places and data are fictional. Only addition, subtraction, multiplication and division are needed, so a four-function calculator is enough.
Question 1 (multiple choice · foundation)
Which of these is the best example of a good that is rival but non-excludable?
- (A) Fish in open ocean waters that any boat may fish
- (B) A pizza bought from a shop
- (C) A film on a paid streaming service
- (D) A coastal flood barrier that protects a whole town
Answer and explanation
Answer: (A). Each fish caught is one fewer for other boats (rival), and nobody can stop a boat from fishing (non-excludable). This is an open-access resource.
- (B) is rival and excludable: the shop does not hand over the pizza until you pay. It is a private good.
- (C) is excludable (no subscription, no film) and non-rival (one more viewer does not stop others watching). It is a club good, a background term.
- (D) is non-rival and non-excludable: a public good. It fails the rival test.
Question 2 (multiple choice · core)
A private company is thinking of building a sea wall that would protect every home in the town of Dunmere (fictional). It could not stop any home behind the wall from being protected. Which statement best explains why the company is unlikely to build the wall?
- (A) Homeowners can benefit without paying, so many will free ride and the company cannot collect enough revenue to cover its costs.
- (B) The wall is rival, so protecting one more home reduces the protection of the others.
- (C) The marginal cost of protecting one more home, once the wall is built, is very high.
- (D) Total benefit to the town must be less than the cost, or the company would build it.
Answer and explanation
Answer: (A). The wall is non-excludable, so each homeowner is protected whether or not they pay. Each has an incentive to free ride, and the company cannot turn the wall’s benefit into revenue.
- (B) is wrong about the good: the wall is non-rival. One more house protected takes no protection from the others.
- (C) gets it backwards: once the wall exists, protecting one more home costs almost nothing.
- (D) assumes the market always provides goods worth more than they cost. With a non-excludable good, total benefit can exceed cost and the market still fails to provide it.
Question 3 (multiple choice · core)
The government of Lisvane (fictional) provides free primary schooling in state schools. Which statement is correct?
- (A) Schooling remains a private good: a school place is rival and pupils can be excluded. The government provides it free for other reasons, such as its wider benefits to society and equal access.
- (B) Schooling becomes a public good because the government pays for it.
- (C) Schooling is non-rival, because one more pupil in a class does not reduce learning for anyone.
- (D) Schooling is an open-access resource, because anyone may attend free of charge.
Answer and explanation
Answer: (A). The type of good depends on its features, not on who provides it. Class sizes are limited (rival) and schools can refuse entry (excludable).
- (B) confuses the provider with the type of good. Government provision does not change rivalry or excludability.
- (C) ignores the limit on class places. Once a class is full, one more pupil takes a place or attention away from others.
- (D) confuses free access with non-excludability. Schools can and do decide who may attend, through catchment areas and admissions rules.
Question 4 (multiple choice · core)
Anyone may cut firewood in Ardley Forest (fictional), and there is no limit on how much. Compared with the socially optimal outcome, what is most likely?
- (A) Too much wood is cut, because each cutter ignores the cost they impose on other cutters, who find fewer trees left.
- (B) Too little wood is cut, because cutters free ride on each other.
- (C) The optimal amount is cut, because each cutter compares benefits and costs.
- (D) Too little wood is cut, because the trees are non-rival.
Answer and explanation
Answer: (A). The forest is rival and non-excludable. Each cutter keeps cutting while their own benefit covers their own cost. The wood lost to other cutters is ignored, so the forest is overused.
- (B) confuses open-access resources with public goods. Free riding causes underprovision of public goods; open access causes overuse.
- (C) misses that each cutter weighs only private costs, not the cost imposed on others.
- (D) is wrong about the trees: a tree one person cuts cannot be cut by another, so the wood is rival.
Question 5 (graph · core)
Ring Road in the city of Haldon (fictional) is free to use and anyone may drive on it. At rush hour, each extra car slows every other car down.
(a) Draw a correctly labelled graph of the market for rush-hour trips on Ring Road. Show the demand curve (marginal social benefit), marginal private cost (MPC) and marginal social cost (MSC). Label the quantity of trips drivers choose, Q_m, and the socially optimal quantity, Q*. (b) Shade the deadweight loss. (c) The city introduces a rush-hour charge per trip. Explain how this could move the road to Q*, and say how the charge changes the road’s excludability.
Model answer and suggested Marlbridge rubric
(a) Vertical axis: “Price, cost, benefit ($ per trip)”. Horizontal axis: “Number of rush-hour trips”. Draw a downward-sloping demand curve labelled D = MSB, an upward-sloping MPC, and an MSC above MPC, with the gap widening as trips increase (each extra car slows more cars). Q_m is where D meets MPC. Q* is where D meets MSC, to the left of Q_m.
(b) Shade the triangle bounded by MSC (above), the demand curve (below) and the vertical line at Q_m, with its left corner at Q*. For trips between Q* and Q_m, the cost to society is greater than the benefit.
(c) A charge per trip equal to the gap between MSC and MPC at Q* raises each driver’s cost to the social cost at the optimum, so drivers choose Q*. Drivers now pay for the delay they impose on others. The charge also makes the road excludable at rush hour: drivers who do not pay can be kept off (for example, fined by camera).
| Point | What earns it |
|---|---|
| 1 | Axes labelled; D = MSB downward sloping; MPC and MSC upward sloping with MSC above MPC |
| 1 | Q_m at D = MPC and Q* at D = MSC, with Q* < Q_m |
| 1 | Deadweight loss triangle correctly placed between Q* and Q_m |
| 1 | Charge explained as making drivers face the cost they impose on others, and the road becomes excludable |
Do not award the third point for a triangle to the left of Q*: overuse means the loss lies on trips beyond the optimum.
Question 6 (calculation · core)
Brannock (fictional) has 1,000 households. A district-wide mosquito-spraying programme would protect every household and costs $30,000 per season. Seasonal valuations are: 300 households value it at $50 each, 500 at $30 each and 200 at $10 each.
(a) Classify the spraying programme, with a reason for each test. (b) Calculate the total benefit and decide whether the programme is efficient. (c) A charity asks for voluntary donations. Explain why it is unlikely to raise $30,000, using a calculation. (d) The district funds the programme with an equal tax on every household. Calculate the tax, the net gain of each group and the total net gain. (e) If the programme cost $35,000 instead, should the district provide it? Explain.
Worked solution and suggested Marlbridge rubric
(a) Non-rival: protecting one more household does not reduce protection for the others. Non-excludable: a household that does not pay cannot be left unsprayed while its neighbours are sprayed. So it is a public good.
(b) Total benefit = 300 × $50 + 500 × $30 + 200 × $10 = $15,000 + $15,000 + $2,000 = $32,000. This is more than $30,000, so the programme is efficient, with a net gain of $2,000.
(c) Each household is protected whether or not it gives, so each has an incentive to free ride. Even if all 300 keenest households gave their full $50, the charity would raise only $15,000, leaving a $15,000 shortfall. In practice many give less than their valuation, or nothing.
(d) Tax = $30,000 ÷ 1,000 = $30 per household. Net gains: $50 − $30 = +$20; $30 − $30 = $0; $10 − $30 = −$20. Total: 300 × $20 + 0 − 200 × $20 = $6,000 − $4,000 = $2,000, which matches (b).
(e) No. Total benefit ($32,000) would be less than the cost ($35,000), a net loss of $3,000. Government should provide a public good only when its total benefit is at least its cost.
| Point | What earns it |
|---|---|
| 1 | Public good, with a correct reason for both non-rival and non-excludable |
| 1 | $32,000 total benefit and “efficient” |
| 1 | Free riding linked to non-excludability, with a supporting calculation |
| 1 | $30 tax and the three net gains (+$20, $0, −$20) |
| 1 | (e) “no”, comparing $32,000 with $35,000 |
Common error: comparing one household’s valuation ($50) with the whole cost. For a non-rival good, add up the benefits of everyone who enjoys it.
Question 7 (calculation and explanation · stretch)
Farms in the Tarrow Valley (fictional) pump water from one shared underground aquifer. Any farm may sink a pump, and there is no limit. Each pump costs $12 thousand per year to run. More pumps lower the water table, so each pump yields less. The table gives the total value of crops grown with the water.
| Pumps | 5 | 6 | 7 | 8 | 9 | 10 | 12 | 14 | 15 |
|---|---|---|---|---|---|---|---|---|---|
| Total crop value ($ thousand per year) | 150 | 168 | 182 | 192 | 198 | 200 | 192 | 168 | 150 |
(a) Explain why the aquifer is an open-access resource. (b) Each farm sinks a pump if the crop value per pump at least covers its cost. How many pumps are sunk? (c) Find the efficient number of pumps and the net value of the aquifer at that number and at the open-access number. (d) Use the 8th pump to explain why open access leads to overuse. (e) Suggest a policy that would bring the number of pumps to the efficient level, with a value if it is a charge.
Worked solution and suggested Marlbridge rubric
(a) Water one farm pumps cannot be used by another (rival), and no farm can be stopped from sinking a pump (non-excludable).
(b) Value per pump = total ÷ pumps. At 14 pumps: 168 ÷ 14 = $12 thousand, which just covers the cost. A 15th pump would yield only 150 ÷ 15 = $10 thousand. So 14 pumps are sunk.
(c) Extra value of each pump: 6th: 168 − 150 = 18; 7th: 182 − 168 = 14; 8th: 192 − 182 = 10 (all $ thousand). Add pumps while the extra value is at least $12 thousand: the 7th adds 14, the 8th only 10. The efficient number is 7 pumps.
- At 7 pumps: net value = 182 − 7 × 12 = $98 thousand. (At 6 or 8 pumps it is $96 thousand.)
- At 14 pumps: net value = 168 − 14 × 12 = $0.
(d) The 8th farm’s pump yields 192 ÷ 8 = $24 thousand of crops for that farm, so it is worth sinking. But total crop value rises by only $10 thousand. The other $14 thousand is water the first 7 farms lose because the water table falls. The 8th farm ignores this cost, so it pumps although society loses $2 thousand.
(e) Any one: a cap of 7 pump licences; or a charge per pump of more than $12 thousand and up to $14 thousand per year (for example $13 thousand: the 7th pump earns 26 − 12 − 13 = $1 thousand, the 8th would earn 24 − 12 − 13 = −$1 thousand); or a single owner or water authority that controls pumping. Each policy makes users face the cost their pumping imposes on others.
| Point | What earns it |
|---|---|
| 1 | Rival and non-excludable, both explained |
| 1 | 14 pumps, using value per pump |
| 1 | 7 pumps, using extra value compared with cost, and net values $98 thousand and $0 |
| 1 | 8th pump: own value $24 thousand compared with an extra $10 thousand, with the $14 thousand loss to other farms identified |
| 1 | A workable policy; any charge stated must lie above $12 thousand and at most $14 thousand |
How did you do?
- Q1, Q3 or Q6(a) wrong: re-read “Two questions about any good” and Figure 1 in the study guide. Classify by features, not by who provides the good.
- Q2 or Q6 wrong: re-read “Public goods and the free rider problem” and Worked example 1. Add up everyone’s benefit before comparing with the cost.
- Q4, Q5 or Q7 wrong: re-read “Open-access resources and overuse”, Figure 2 and Worked example 2. Use the extra output a user adds, not their own share.
Then tick off the topic checklist.