The government is considering four possible capital investment projects. It has the resources to implement only one of these projects. The table below shows the estimated value of the private and external costs and benefits that each project is expected to yield.
| Offshore wind farm (£ million) | High-speed rail link (£ million) | Community sports league (£ million) | Tech research hub (£ million) | |
|---|---|---|---|---|
| Private benefits | 150 | 300 | 20 | 400 |
| Private costs | 200 | 250 | 40 | 300 |
| Positive externalities | 180 | 90 | 150 | 80 |
| Negative externalities | 30 | 110 | 10 | 130 |
Which one of the projects should the government adopt if it wishes to maximise the welfare of the whole economy?
Offshore wind farm
High-speed rail link
Community sports league
Tech research hub
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.