A small engineering firm is deciding whether to develop a new production process. Other firms would be able to learn from the process without paying the developer. Table 1 shows estimates for the project.
| Item | Amount |
|---|---|
| Total resource cost of development | £150,000 |
| Private benefit to the developing firm | £120,000 |
| Total social benefit | £170,000 |
| Proposed government subsidy | £35,000 |
Using Table 1, explain how the proposed subsidy could reduce market failure.
83 exam-style questions on AQA GCSE Economics 1.6 Market failure, covering 1.6.1a Market failure as misallocation of resources, 1.6.1b Government intervention, 1.6.2a Defining externalities, and 1.6.2b Positive and negative externalities. Each one has a worked solution and a mark scheme showing where the marks go.