Electricity retail suppliers are legally mandated by a new carbon-reduction regulation to source an increasing proportion of their wholesale power from offshore wind farms. Offshore wind developers charge a price premium per megawatt-hour (MWh\text{MWh}MWh) compared to conventional gas-fired generators due to the high capital costs of marine infrastructure.
It can be deduced from the text above that:
the government is directly subsidising offshore wind infrastructure to ensure retail electricity prices remain stable.
the social benefit of reducing carbon emissions exceeds the private cost of constructing offshore wind farms.
electricity retail suppliers will experience an increase in their average wholesale procurement cost per MWh\text{MWh}MWh as they transition to the mandated energy mix.
a carbon tariff on imported fossil fuels has been implemented to artificially raise the operating costs of conventional generators.
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.