Externalities

Extract C (lines 3–4) states that ‘the mining, manufacturing and disposal process for batteries could soon become an environmental disaster.’ With the help of a diagram, explain why the production and sale of lithium-ion batteries might lead to market failure.

Figure 5 shows the marginal private and social benefit (MPB and MSB) curves and the marginal private and social cost (MPC and MSC) curves for a product.

The socially optimal level of output for this product is

Assess the view that high-speed Internet connection is a necessity for modern life and should be provided by the government, free of charge, to all households.

Which one of the following is a reason why the extension of property rights is likely to reduce market failure?

Figure 1 shows the marginal private benefit and marginal social benefit (MPB and MSB) curves and the marginal private cost and marginal social cost (MPC and MSC) curves in the market for a good.

The diagram represents a good with

The UK government has set a target to reduce net greenhouse gas (GHG) emissions to zero by 2050.

To what extent, if at all, do the data suggest that to achieve its net-zero emissions target, the government should focus on reducing GHG emissions from the transport sector? You must use the data in Extract C to support your assessment.

Explain why, without government intervention, markets are likely to allocate too few resources to dealing with the problem of climate change.

After considering Extract E, and the original evidence in Extracts A, B, C and D, which policies, if any, would you recommend that the UK government should introduce to ensure that it achieves its zero-emissions target by 2050. Justify your recommendation.

Extract B (lines 8–10) states: ‘many companies intentionally make it difficult to repair their products in order to increase sales. This is both economically inefficient and environmentally foolish; it imposes costs on the environment even though it may make sense for individual companies.’

With the help of a diagram, explain how the production of goods which are designed not to last long may result in market failure.

Extract C (lines 17–19) states: ‘Many environmental economists suggest that making firms pay for the costs of landfill associated with their products, or taxing raw material inputs, will be necessary to ensure a sustainable future for all.’

Using the extracts and your knowledge of economics, evaluate policies, if any, that governments in developed countries should pursue to reduce waste and encourage the recycling of waste products.

The existence of negative externalities in consumption results in a misallocation of resources. This is because at the free market level of output the

Explain why the use of petrol and diesel cars may be a source of market failure.

Assess the view that regulation is a better policy for dealing with the problem of air pollution than the allocation of property rights or taxation.

Explain why, in a free market, sugary drinks may be overconsumed.

The diagram below shows the marginal private and social benefit (MPB and MSB)

where there are positive externalities in production.

At the free market equilibrium, market failure occurs. Which one of the following is correct?