Question 1

Which of the following are examples of external costs of motoring?
 (i) Accidents
(ii) Pollution from exhaust fumes
(iii) Noise
(iv) Congestion

Accepted Answer

The answer of Which of the following are examples of...

Question 2

In the long run, the supply of road space is not fixed. In identifying the socially efficient level of road construction, the authorities need to find the point at which

Accepted Answer

The socially efficient level of road construction is found where the Marginal Social Benefit (MSB) of construction equals the Marginal Social Cost (MSC). This balance ensures that the resources are allocated efficiently, maximizing societal welfare.

Question 3

Which of the following motoring costs are not marginal (private) costs to the motorist?

Accepted Answer

Depreciation due to ageing of the vehicle is not a marginal cost because it occurs regardless of whether the vehicle is used or not. It is a fixed cost rather than a cost that varies with the level of usage.

Question 4

Consider the following externalities associated with traffic and traffic congestion.
(i) Air pollution externality
(ii) Noise pollution externality
(iii) Non- monetary congestion externality
(iv) Monetary congestion externality
Which of them explain the divergence between the MPC and MSC as more cars enter the road network?

Accepted Answer

Before congestion, air and noise pollution (i and ii) are the primary externalities causing the divergence between MPC and MSC. After congestion, all listed externalities (i, ii, iii, and iv) contribute to the divergence.

Question 5

Which of the following are problems with building more roads to reduce congestion?

Accepted Answer

Building more roads to reduce congestion often leads to issues such as equity costs, as not everyone benefits equally from new infrastructure; a faster rate of growth of traffic, due to induced demand; and environmental costs, including increased pollution and habitat destruction.

Question 6

Why will increasing new car tax and car licences have little effect on car use?

Accepted Answer

Increasing new car tax and car licenses are examples of fixed costs because they are costs that do not change with the amount of car use. Since they are fixed, they do not affect the marginal cost of using a car, which is the cost of using the car for one more unit of time or distance. This means that after paying these fixed costs, the cost of additional car use does not increase, leading to little effect on the decision to use the car more or less.

Question 7

Which city has the following transport policy? When there is a possibility of dangerous pollution from car exhaust fumes, about half of the motor vehicles are excluded from the affected area.

Accepted Answer

Athens has implemented a policy where, on days with high pollution levels, vehicles are restricted based on their license plate numbers to reduce the amount of exhaust fumes and improve air quality.

Question 8

Which city has the following transport policy? Car licences are very expensive, vehicle entry to the city centre is very restricted, road pricing is being introduced and modern cheap rail transport is being expanded.

Accepted Answer

Singapore is known for its strict and expensive car ownership policies, including high costs for car licenses, restrictions on vehicle entry into the city center, the implementation of road pricing to manage traffic congestion, and the expansion of its modern and affordable rail transport system. These measures are part of Singapore's efforts to reduce traffic congestion and promote public transportation.

Question 9

Which of the following is a market- based solution to traffic congestion?

Accepted Answer

Road pricing is a market-based solution to traffic congestion as it involves charging drivers for using roads during peak times, thereby encouraging them to change their travel habits to avoid fees.

Question 10

Which of the following is not a drawback of parking restrictions?

Accepted Answer

Parking restrictions are typically implemented to reduce congestion and improve traffic flow. While they may lead to people driving around looking for parking spaces (A), parking illegally (B), or parking in residential areas (C), these are considered drawbacks. However, encouraging the use of public transportation (D) is generally viewed as a positive outcome, not a drawback, as it can lead to reduced traffic congestion and pollution, despite potential increases in public transport usage.

Question 11

Building more roads will lead to gainers and losers. If the gainers of the new road compensated the losers, but still had a net gain, there would be

Accepted Answer

A potential Pareto improvement occurs when the gains from a change are large enough that those who gain could in theory compensate those who lose, and still be better off. This concept does not necessarily require actual compensation, just the potential for it.

Question 12

Privatisation is the transfer of

Accepted Answer

Privatisation involves the transfer of government-owned or operated businesses, assets, or services to the private sector, aiming to improve efficiency, raise capital, or reduce government involvement in the economy.

Question 13

Which of the following UK nationalised industries (now privatised) had never been in the private sector?

Accepted Answer

The answer of Which of the following UK nationalised industries...

Question 14

Which of the following UK nationalised industries (now privatised) had previously been part of the private sector?

Accepted Answer

All of the options listed (BT, British Gas, British Rail) were originally part of the private sector before being nationalised by the UK government and then later privatised again.

Question 15

Railway privatisation in the UK has resulted in____passengers and _______fares.

Accepted Answer

Railway privatisation in the UK has led to an increase in the number of passengers using the railways, but it has also been associated with higher fares over time.

Question 16

When the minimum economic scale of a firm is close to the size of the market, we call the firm a

Accepted Answer

A natural monopoly occurs when a firm's minimum economic scale is close to or exceeds the size of the market, making it most efficient for a single firm to serve the entire market.

Question 17

The best UK example of a natural monopoly is

Accepted Answer

North West Water is the best example of a natural monopoly among the options given. Natural monopolies occur in industries where high infrastructure costs and other barriers to entry effectively prevent competition. Utilities like water supply are classic examples because the infrastructure to deliver water (pipes, treatment facilities) is very expensive to build and maintain, making it inefficient for multiple companies to provide the same service in the same area.

Question 18

De- regulation is where the government

Accepted Answer

De-regulation typically involves the government reducing or eliminating restrictions in industries to encourage more competition, which can include removing barriers to entry and minimum product quality standards.

Question 19

Anti- monopoly legislation is undertaken to_______competition and market regulation is undertaken to________-competition.

Accepted Answer

Anti-monopoly legislation is designed to promote competition by preventing monopolies or oligopolies that could dominate the market, while market regulation is often implemented to restrict competition in certain areas to ensure safety, fairness, or to address market failures.

Question 20

In the UK it is possible to buy electricity from a gas company and gas from an electricity company. This is

Accepted Answer

This situation reflects making markets more contestable, as it allows companies to enter markets they were not traditionally part of, increasing competition and consumer choice.

Quiz 22: Government and the Market

Which of the following are examples of external costs of motoring? (i) Accidents (ii) Pollution from exhaust fumes (iii) Noise (iv) Congestion