The table below shows the estimated private benefits, private costs, social benefits, and social costs of four local green initiatives under consideration by a city council.
| Community Solar Microgrid | Biomass Heating Upgrade | Active Travel Green Corridor | Urban Forest & Wetland Restoration | |
|---|---|---|---|---|
| Private benefit | £10m | £18m | £8m | £6m |
| Private cost | £12m | £22m | £14m | £8m |
| Social benefit | £36m | £70m | £48m | £28m |
| Social cost | £16m | £35m | £22m | £18m |
The city council has a maximum budget of £15 million to fund one of these green initiatives. The actual financial cost to the council is represented by the private cost of the project.
Which initiative should the council choose to maximize net social welfare, given the budget constraint?
Community Solar Microgrid
Biomass Heating Upgrade
Active Travel Green Corridor
Urban Forest & Wetland Restoration
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.