Read the following passage:
'Electricity suppliers are legally mandated by a new green energy standard to source a rising share of their total electricity from offshore wind farms. By next year, offshore wind must account for at least 30% of all kilowatt-hours supplied to domestic customers. Offshore wind developers receive a significant price premium for their electricity because of high transmission infrastructure costs and the limited availability of offshore grid connections.'
It can be deduced from the passage that
the government is directly subsidising the construction and maintenance of offshore wind farms.
the marginal social cost of offshore wind power generation is greater than its marginal private cost.
electricity suppliers face higher average unit sourcing costs because a mandatory proportion of their electricity must be bought from higher-priced offshore wind developers.
the renewable energy standard acts as a Pigouvian tax that fully internalises the negative externalities of conventional electricity generation.
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.