Renewable electricity creates positive externalities. The government plans to pay electricity generators £20 for each megawatt-hour of renewable electricity produced. The payment will apply to 45 million megawatt-hours.
The government has a budget of £900 million and can fund only one of the following programmes:
| Programme | Spending required |
|---|---|
| Payments for renewable electricity | To be calculated |
| Extending broadband in rural areas | £900 million |
Calculate the total amount the government will pay to electricity generators.
State the opportunity cost to the government if it funds the payments for renewable electricity.
104 exam-style questions on AQA GCSE Economics 2.3 How the government manages the economy, covering 2.3.1a Fiscal policy and income and expenditure, 2.3.1b Fiscal policy and government objectives, 2.3.1c The government budget, 2.3.2a The meaning of monetary policy, 2.3.2b Uses of monetary policy, 2.3.3a Supply-side policies and their trade-offs, 2.3.3b Using supply-side policies, and 2.3.4 Policies to correct positive and negative externalities. Each one has a worked solution and a mark scheme showing where the marks go.