The national grid operator is planning to construct three new high-voltage subsea electrical interconnectors to neighboring countries to manage the surge in renewable energy generation. The development is likely to face opposition from marine conservationists concerned about seabed disturbance, but will be welcomed by industrial energy consumers and business groups, which have warned that a failure to expand transmission capacity will lead to localized power shortages and higher electricity prices.
If the three interconnectors were constructed, all other things being equal, which one of the following is most likely to be true?
The overall impact would necessarily create more positive externalities than negative externalities.
The domestic demand for electricity would become perfectly price inelastic.
The supply curve for electricity in the domestic market would shift to the right.
The new subsea interconnectors would be examples of pure public goods.
256 exam-style questions on AQA A Level Economics 1.3 Price determination in a competitive market, covering 1.3.1 The determinants of the demand for goods and services, 1.3.2 Price, income and cross elasticities of demand, 1.3.3 The determinants of the supply of goods and services, 1.3.4 Price elasticity of supply, 1.3.5 The determination of equilibrium market prices, and 1.3.6 The interrelationship between markets. Each one has a worked solution and a mark scheme showing where the marks go.