HCI H2 Prelim 2024 Paper 2 Mark Scheme

Question 1 Museums are important cultural institutions that enrich communities and benefit even non-visitors. They often rely on government subsidies to keep ticket prices affordable to as many segments of society as possible. However, as some museums prosper and attract large crowds, there is growing debate over reducing subsidies to reallocate funds elsewhere. a) Explain why museums are not public goods but the government considers it necessary to intervene in the market for museums. (10) b) Discuss whether reducing subsidies for museums is justified. (15) a) R1: Explain why museums are not public goods. Public goods refer to goods which are non-excludable and non-rival. The points here can be embedded into direct application of how museums are excludable and rival. • Non-excludability in consumption refers to the situation where the consumption or use of the good or service cannot be limited to the consumers who have paid for it. The reason is due to the lack of private property rights over its use because it is impossible or prohibitively expensive to exclude non-payers from consuming it. • Non-rivalry in consumption refers to the situation where the consumption or use of the good or service by one consumer does not reduce its availability to another consumer. Museums are not public goods because they are excludable and museum visitor space is rival when crowded. • Museums are excludable as they can easily have ticket attendants at the entrances to check if visitors have purchased tickets for entry. Those who have not purchased tickets are rejected from entering the museum. This prevents free riders from entering the museum. • Viewing of the exhibits within a museum are non-rival when it is not crowded. A person viewing the exhibit does not diminish the viewing pleasure of another person viewing the exhibit next to him/her. However, once the museum becomes crowded then rivalry may set in due to limited space, as a person viewing the exhibit may block others from viewing the exhibit clearly.

R2: Explain that the government intervenes due to the presence of positive externalities. The government intervenes due to the presence of positive externalities in museum consumption. Figure.7¿ .Positive.externalities.in.museum.consumption • With reference to Fig 1, the Marginal Private Cost (MPC) refers to the costs incurred by museums for each additional visitor, such as maintenance, staffing, and exhibit upkeep. The Marginal Private Benefit (MPB) reflects the personal enjoyment or educational value that visitors gain from attending the museum. • However, there is often a divergence between private and social benefits due to the external benefits generated by museum visits. Museums provide significant external benefits to third parties beyond the visitors themselves, such as local communities, businesses, and future generations. For example, museums help preserve cultural heritage, which benefits