A local authority designs a scheme to build a new network of bicycle lanes to encourage active travel and reduce urban congestion.
Estimates of the costs and benefits of the project are shown below:
| Private costs | Social costs | Private benefits | Social benefits | |
|---|---|---|---|---|
| £ million | 35 | 30 | 28 | 38 |
From the figures in the table, it can be concluded that the bicycle lane project will have
negative production externalities of £5 million.
positive consumption externalities of £10 million.
positive production externalities of £15 million.
total external benefits of £8 million.
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.