The Mixed Economy (Edexcel IGCSE Economics): Exam Questions

The largest airport in Nigeria is located in Lagos. The Nigerian Government has made several attempts to privatise the country’s four main airports over recent years. This has been unsuccessful due to resistance from trade unions that have members at the airport.

However, recently there has been increased interest from a number of private investors. This is due to the growing population, increasing demand for flights to and from Lagos and a stronger industrial base in the country. This means privatisation of Lagos Airport is now more likely to happen.

Whilst under the control of the government, subsidies have been used to pay some of the costs to operate the airport, as well as to improve safety and airport facilities.

With reference to the data above and your knowledge of economics, evaluate whether consumers are likely to benefit from the privatisation of Lagos Airport.

What is meant by the term private sector?

Describe one reason why innovation may be more likely to occur in a monopoly.

At the start of 2023, a study was carried out on the government‐owned Portuguese airline, TAP Air, to see whether there were any potential investors. The objective was to begin the process of privatising TAP Air as soon as possible.

With reference to the data above and your knowledge of economics, analyse the possible advantages of privatisation for TAP Air.

Describe one advantage of privatisation for a government.

Hiking is a popular activity for visitors to the Caribbean island of Saint Vincent. Tourists can hire a guide to accompany them on the popular route of La Soufrière Volcano by booking online before arriving on the island and the price is $34.However, the price is only $20 if the guide is booked directly on arrival. Some tourists have complained because they did not know this was possible.

With reference to the data above and your knowledge of economics, analyse a possible reason why the market for tourism services is an inefficient allocation of resources.

Define the term public sector.

Every year in the UK, heavy rainfall is a cause of severe flooding in some areas. Calderdale in Yorkshire has been badly affected for a number of years. Increased water levels from the River Calder caused damage to residential properties, business premises and roads. The UK Government provided a £32m flood defence scheme to try to reduce the problem.

(Source adapted from: Link (opens in a new tab))

With reference to the data above and your knowledge of economics, analyse why the UK Government might provide flood defences.

Government-owned Angola Telecom is to be privatised in an attempt to make the industry more efficient.

Explain one possible disadvantage of privatisation for workers in the telecoms industry in Angola.

What is meant by the term privatisation?

The Brazilian Government announced plans to privatise one of its state-owned food companies.

Explain one possible advantage of privatisation for consumers in Brazil.

The Tallinn Song Festival Grounds (TSFG) is a popular live music venue in Estonia and can hold 65,000 people. Although it is very popular there are only a few firms selling food and drink at the TSFG venue.

The lack of competition at the TSFG venue means that service is slow and queues are long. Food and drink prices are expensive and security checks mean that no food and drink can be brought in from outside the TSFG venue.

With reference to the data above and your knowledge of economics, analyse how market failure is likely to occur at the TSFG venue.

Simona owns a hairdressing business in Romania. She charges low prices and makes no charge when customers arrive late for appointments or make very late cancellations. She thinks customer care is more important than making a profit.

However, some customers have complained at having to wait weeks before an appointment is available. As a result, Simona has lost customers. This has caused financial problems in repaying a loan to the bank.

In response, Simona is considering increasing her prices and charging a fee to those who arrive late or cancel without suitable notice.

With reference to the data above and your knowledge of economics, assess the benefits to Simona of making these changes.

In 2023, the Kazakhstan Government privatised KTZ, its national railway company. KTZ is the largest employer in Kazakhstan and makes a profit from its operations.

With reference to the data above and your knowledge of economics, analyse the possible disadvantages of the Kazakhstan Government privatising the national railway company.

Which one of the following is defined as ‘the selling of an enterprise controlled by the government to the private sector’?

Street lighting is provided by governments in many countries. It is provided to improve safety for pedestrians and increase visibility for motorists. It also provides a more inviting environment after dark.

With reference to the data above and your knowledge of economics, analyse why the free rider problem means street lighting is provided by the government.

The Cuban Government owns and runs most industries in the country and more than 75% of the labour force is employed by the state.

With reference to the data above and your knowledge of economics, analyse the benefits of having a large public sector to a country such as Cuba.

Describe one benefit to consumers of privatisation.

Which one of the following is likely to lead to an inefficient allocation of resources?

State-owned airline, Air India, currently offers a high number of domestic flights from both Mumbai and New Delhi. It also flies to destinations worldwide, including the US and Europe. However, it has reduced the number of countries it flies to, especially in other parts of Asia and Africa.

The Indian Government has announced plans to sell all its shares in the airline. Air India had been making a loss and struggling to pay oil companies for its fuel. However, the government reduced almost half of this debt before making the announcement to sell the airline.

With reference to the data above and your knowledge of economics, evaluate whether Air India is likely to benefit from privatisation.

Street lighting is considered to be a public good.

Explain one reason why this may cause a free rider problem.

What is meant by the term mixed economy?

Define the term government.

During the last six years, the government budget of Slovenia has raised almost €1bn in revenue from the privatisation of public sector assets. Most recently was the sale of 65% of the government shares in NLB Bank. The money raised from the sales was mostly transferred to the government budget and used for various purposes. These included the repayment of public sector debt and the long-term stability of the Slovenian pension system.

(Source adapted from: Link (opens in a new tab))

With reference to the data above and your knowledge of economics, analyse the possible benefits of privatisation for the Slovenian Government.

The sale or transfer of public sector assets to the private sector is known as

Some countries, such as Cuba, rely mostly on public sector ownership to provide goods and services. Others, such as Japan rely more on private sector ownership.

In Japan, health, education and street lighting are often provided by public sector ownership but Japan also produces a high quantity of electronic goods used for entertainment.

With reference to the data above and your knowledge of economics, assess how effective public sector ownership and private sector ownership are likely to be in solving the economic problem.

Lanterns is an English café, located just outside a town where there are few job opportunities. It was set up by sisters Jo and Fiona who, instead of aiming to make a profit, wanted to help young people in their local area. All their waiters and waitresses are under 25 and were previously inexperienced and unemployed.

At first, the café was popular but now there are a lot of complaints about the length of time it takes for orders to arrive. Fiona thinks they need to employ experienced waiters and waitresses and change their business aims to maximise their profits.

With reference to the data above and your knowledge of economics, assess whether Lanterns should change their business aims.

More than half of Cambodia’s 6,000km of roads have been classified as ‘of poor quality’ by the Ministry of Public Works and Transport. As business grows in the country, drivers overload their trucks, which leads to safety issues and greater damage to the roads. A higher level of investment is needed from the government to repair damage and to build new roads which would need less maintenance.

(Source adapted from: http://www.phnompenhpost.com/business/ (opens in a new tab)cambodia-facing-dilemma-plan-give-roads-facelift)

With reference to the data above and your knowledge of economics, assess the extent to which high levels of public sector investment to improve the roads may benefit the Cambodian economy.

In 2019, the Indian Government privatised six major state-owned airports. It handed over the operations, management and development of the airports to private sector firms for the next 50 years.

Explain one way privatisation could improve productivity in these Indian airports.

Which one of the following is part of the economic problem of scarcity?

Which one of the following might be an aim of a firm in the private sector?

Cyprus has a mixed economy.

Which one of the following is most likely to be provided by the public sector in Cyprus?

Define the term free rider.

Who should have the flu injection?

Flu is an unpredictable virus that can cause mild or unpleasant illness in most people. It can cause severe illness and even death among vulnerable groups, including older people, pregnant women and people with other health problems. These groups may, therefore, receive a free vaccination in the UK, to ensure they are protected against the virus. Although most people receive their vaccination from a public sector doctor, the UK Government has to pay private sector pharmacies to also provide this service. The cost to the UK Government of funding these vaccinations is over £100m per year.

Explain one possible reason why the UK Government pays private sector pharmacies to provide the flu vaccination.