A commercial agricultural farm installs a reed bed water filtration system to treat its run-off before it enters a local river. While this system costs the farm £15,000 £15,000\,£15,000 annually to maintain, it improves local river water quality, which saves a downstream municipal water utility company £45,000 £45,000\,£45,000 per year in chemical purification costs.
The £45,000 £45,000\,£45,000 annual saving to the water utility company is an example of a substantial
private cost
private benefit
external benefit
external cost
54 exam-style questions on Edexcel A A Level Economics 1.3.2 Externalities. Each one has a worked solution and a mark scheme showing where the marks go.