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WalesEconomicsQuick questions
Introduction to Economic Principles (AS Unit 1)
Quick questions on Market failure - WJEC A-Level Economics
3short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What are externalities?Show answer
With a negative externality (such as pollution from production), the marginal social cost exceeds the marginal private cost. The free market produces where private cost equals private benefit, which is more than the social optimum where social cost equals social benefit, so the good is over-produced and there is a deadweight welfare loss. With a positive externality (such as the benefits of education spilling over to society), marginal social benefit exceeds marginal private benefit, so the market under-produces. In both cases output diverges from the socially efficient quantity.
What is q1?Show answer
Define a public good. [2 marks]
What is q2?Show answer
Explain why a negative externality leads to over-production. [3 marks]
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