A metropolitan authority is evaluating four proposed environmental infrastructure initiatives to improve urban sustainability. Due to a restricted capital budget, only one project can be funded. The projected private and external costs and benefits of each scheme are detailed in the table below:
| Community solar cooperative (£ million) | Suburban electric bus network (£ million) | Urban rooftop afforestation scheme (£ million) | Public leisure & cycling corridor (£ million) | |
|---|---|---|---|---|
| Private benefits | 320 | 540 | 150 | 90 |
| Private costs | 280 | 490 | 210 | 120 |
| Positive externalities | 180 | 220 | 360 | 380 |
| Negative externalities | 40 | 110 | 20 | 50 |
Which project should the authority approve if its objective is to maximise the net economic welfare of the community?
Community solar cooperative
Suburban electric bus network
Urban rooftop afforestation scheme
Public leisure & cycling corridor
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.