Table 1 shows the private benefit, private cost, social benefit and social cost of four different regional transport projects.
| Project | Cycle superhighway | Electric bus fleet upgrade | Smart traffic signaling | Park-and-ride facility |
|---|---|---|---|---|
| Private benefit | £8m | £10m | £5m | £12m |
| Private cost | £12m | £25m | £6m | £18m |
| Social benefit | £42m | £65m | £14m | £32m |
| Social cost | £18m | £35m | £9m | £24m |
A regional transport authority has a maximum of £20 million to spend on these infrastructure projects.
Which one of the projects in Table 1 should the regional transport authority choose to maximise social welfare, given the limited funding available?
Cycle superhighway
Electric bus fleet upgrade
Smart traffic signaling
Park-and-ride facility
378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.