A regional authority is evaluating four proposed infrastructure development projects. Due to strict budget constraints, it can fund only one of these projects. The potential private and external costs and benefits of each project are detailed in the table below.
| Coastal flood defences (£ million) | High-speed fibre broadband (£ million) | Municipal waste-to-energy plant (£ million) | Public library & learning hubs (£ million) | |
|---|---|---|---|---|
| Private benefits | 120 | 850 | 400 | 80 |
| Private costs | 180 | 700 | 350 | 100 |
| Positive externalities | 340 | 150 | 180 | 150 |
| Negative externalities | 30 | 110 | 190 | 10 |
Which one of the projects should the authority approve if its objective is to maximise the net economic welfare of the community?
Coastal flood defences
High-speed fibre broadband
Municipal waste-to-energy plant
Public library & learning hubs
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.