Booklet 2

Question 1

What is Non-Excludability?

Answer 1

Individuals cannot be prevented from enjoying the benefits of the provision of Public Goods or Services.

Question 2

What is Non-Rivalry?

Answer 2

One person gaining from consumption of a good or service does not prevent others from also gaining from the good or service.

Question 3

What are the 2 features of Public Goods?

Answer 3

Non-Excludability

Non-Rivalry

Question 4

What are the 2 best examples of Merit goods?

Answer 4

Education

Health Care

Question 5

What are Merit Goods?

Answer 5

Goods and Services that are provided by the Public and Private Sector, but would be hugely under consumed.
They are said to have positive externalities.

Question 6

What are positive externalities?

Answer 6

Schools have positive externalities, because not only does education have a benefit the individual, but society can benefit from the education of a job.

Question 7

What is Unlimited Liability?

Answer 7

This means the owner is personally responsible for the debts of the business and there is no limit to this responsibility. This means they may have to sell their personal possessions to pay the debt.

Question 8

What is Limited Liability?

Answer 8

The company is responsible for the money it owes and not the individual. This means the personal possessions of its owners are safe. But there is a limit to the amount of which they are liable.

Question 9

Advantages of a sole trader.

Answer 9

All the profit is the owners. 
Your own boss. 
Not accountable to shareholders. 
Flexibility over working hours. 
Easy to run. 
Lack of legal restrictions. 
Greater owner control.

Question 10

Disadvantages of a sole trader.

Answer 10

Unlimited liability. 
Difficulty to sell. 
Less ideas, only yours. 
Lot of hard work. 
Long hours. 
Off sick means loss of work. 
Limited capital.

Question 11

Advantages of a partnership.

Answer 11

Split liability. 
More efficiently run. 
Possibly shorter hours. 
More ideas together. 
Shared responsibility. 
Increased access to capital. 
No need to publish accounts.

Question 12

Disadvantages of a partnership.

Answer 12

Unlimited liability. 
Sharing the profits in accordance of the deeds of partnership. 
Not got complete control. 
Arguments/conflict. 
Owners could feel left out. 
Different ideas/ambitions. 
Can be sued.

Question 13

Advantages of an LTD.

Answer 13

Limited liability. 
Attract people to invest. 
More capital can be raised. 
No limits on shareholders. 
Control can't be lost to outsiders, shares only sold if everyone agrees. 
Business will continue if owner dies.

Question 14

Disadvantages of an LTD.

Answer 14

Difficult to attract shareholders because shares can’t be advertised.
Restricted capital.
Profit is shared amongst shareholders.
Legal procedure to set up which takes time and money.
Accounts become published and can be inspected.
If one shareholder decides to sell it can take time to sell.

Question 15

Advantages of a PLC.

Answer 15

All shareholders have limited liability.
More power may be enjoyed due to large size.
High amounts of capital can be raised from sale of shares to the public.
Economies of scale.
May gain a larger presence in the market.
Banks more willing to lend to PLC’s.

Question 16

Disadvantages of a PLC.

Answer 16

Can be expensive to set up.
Outside interest could take control as shares are on sale to the public.
Accounts can be inspected by the public or competitors.
Have to publish more info than LTD’s.
Less likely to deal with customers on a personal level.
Divorce of ownership and control.
Can be time consuming.

Question 17

Common characteristics of Social Enterprises.

Answer 17

Profits are re-invested.
Social aims eg/
• Job creation
• Training
• Provision of local service.
Directly involved in producing goods or services to a market.
Measure the social impact through preparing a social audit.
Run based on participation by stakeholders.

Question 18

Advantages of a Co-operative.

Answer 18

Still supported when out of work.
Everyone has an equal say.
Supported by being recommended.

Question 19

Disadvantages of Co-operatives.

Answer 19

1 bad experience could damage the reputation of the co-operative.
Share some of the profits.
People can take advantage of you.

Question 20

Characteristics of Charities.

Answer 20

Raises money through donations, sponsorship and from selling products.