1 markOn average, in the UK, a working-age graduate earns approximately £10 000 more per year than a non-graduate.
(Source adapted from:https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/701720/GLMS_2017.pdf)
This suggests a university degree provides a substantial ________________.
external benefit
external cost
private benefit
social cost
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1 markIn 2016 a coastal flood defence scheme was completed at Broomhill Sands in Kent, protecting people, homes and businesses. A £30 million grant from the National Lottery paid for the scheme.
(Source: https://www.gov.uk/government/news/30-million-project-set-to-reduce-flood-risk-in-kent)
The most likely reason for this grant is to ensure the:
exclusivity of Broomhill Sands
provision of a private good
provision of a public good
rivalry of Broomhill Sands
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1 markWhich of these correctly explains the meaning of 'non-rival'?
Once a good has been provided, consumers are unable to reject it
Consumption of the good by one person does not reduce the amount available to be consumed by others
It is impossible for new firms to enter the market to supply the good
Once a good has been provided, it is impossible to stop free-riders from consuming it
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1 markWhich of these explains why there are information gaps in the sale of second-hand motorhomes?
Motorhomes are rival and excludable
Motorhomes create pollution, which is a negative externality
The buyer values the motorhome at a higher price than the seller's valuation
The seller knows more about the quality of the motorhome than the buyer
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1 markWhich of these scenarios could be accurately represented by the diagram below?
The consumption of cigarettes causing lung disease for the consumers of cigarettes
A bakery that creates pleasant smells when baking bread and cakes
Pollution created from people driving their cars
The building of new offices and homes that creates lots of noise
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2 marks"The government must act to improve the allocation of resources in broadband services"
Explain one likely reason why there is a market failure in the market for broadband service (2)
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2 marksThe construction of a new leisure centre would generate the following outcomes
Private Benefit | Private Cost | External Benefit | External Cost |
£300m | £400m | £250m | £15m |
Calculate the welfare gain from the construction of the leisure centre
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10 marksAssess the extent to which ‘information gaps’ (Extract B, lines 5 and 6) and ‘irrational behaviour’ (Extract B, line 11) are the main causes of food waste in the UK (10)
Extract B
Food waste in the supply chain
A report from the British Retail Consortium reveals that supermarkets are directly responsible for around 0.2 million tonnes of food waste every year. This is due to the expiry of use-by-dates and poor handling of stock.
However, 4.1 million tonnes of food waste occurs annually in the food supply chain before it even reaches the supermarkets, indicating the existence of information gaps. The supermarkets are cooperating with food suppliers and farmers to try to reduce this waste. This involves improving forecasts for supply and demand of food and increasing the reliability of transportation and storage.
Consumers, the final stage of the supply chain, waste a further 7 million tonnes of food each year. This suggests irrational behaviour. Supermarkets are also working with consumers to reduce the waste by providing advice on how to store and use leftover food. The development of packaging designs to keep food fresher for longer is one of the innovations under way to reduce waste.
(Source: adapted from ‘Supermarkets tally up food waste bill’. Will Nicholls, in Businessgreen, 19th January 2015.http://www.businessgreen.com/ bg/news/2390792/supermarkets-tally-up-food-waste-bill)
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4 marksThe external benefits of higher education include increased tax revenue, faster economic growth, greater innovation and labour market flexibility.
(Source adapted from: https://www.timeshighereducation.com/news/higher-education-its-good-for-you-and-society/2008681.article#survey-answer)
Draw an externalities diagram to show the likely impact of the consumption of higher education.
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8 marksExamine the likely impact of externalities of copper mining on firms and communities within Chile. (8)
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25 marksEvaluate the likely microeconomic consequences of consumers shifting from vehicles powered by fuel obtained from oil to electric-powered vehicles (25)
The International Energy Agency has predicted that oil use by cars will peak in 2025 because of the increasing number of drivers switching to electric vehicles.
(Source adapted from: https://www.thetimes.co.uk)
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25 marksIn September 2016 the government approved the building of an £18 billion nuclear power station, Hinkley Point C, which will supply 7% of UK electricity for up to 60 years. The power station is funded by Chinese and French investment.
Evaluate the likely private costs and external costs involved in such major power station construction projects. Use an appropriate externalities diagram in your answer (25)
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