A local authority owns a quarry used by building firms. It estimates that 4.8 million tonnes of accessible limestone remain in the quarry. Firms expect to continue wanting limestone for future building projects.
The local authority introduced a charge for each tonne of limestone extracted.
| Period | Extraction charge per tonne | Limestone extracted per year |
|---|---|---|
| Before the charge | £0 | 160,000 tonnes |
| First year after the charge | £8 | 124,000 tonnes |
Using the information, explain how the extraction charge may affect firms' use of limestone and why the local authority will still face the economic problem.
77 exam-style questions on OCR GCSE Economics 1.2 The basic economic problem, covering 1.2.1 Scarce resources and unlimited wants, 1.2.2 The economic problem, 1.2.3 Opportunity cost, and 1.2.4 Costs and benefits of economic choices. Each one has a worked solution and a mark scheme showing where the marks go.