An engineering firm is deciding whether to undertake a research project. Other firms would be able to learn from the new technology without paying towards its development.
| Estimated value | £ million |
|---|---|
| Private benefit to the engineering firm | 18 |
| Benefit to other firms | 7 |
| Private cost of the research project | 22 |
| Proposed government subsidy | 5 |
Using the data, explain how the proposed government subsidy could correct the 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.