AQA, Aquinas, Economics, ECON1, Markets, Market Failure

1. ECON1
WWW.AQUINASECONOMICSAS.CO.UK
@AQUINASECONOMIC
Market Failure
Answer all the questions below
1. Explain the seven causes of market failure
2. Define the following terms:
a. Externalities
b. Marginal Private Cost
c. Marginal External Cost
d. Marginal Social Cost
e. Marginal Private Benefit
f. Marginal External Benefit
g. Positive Externalities
h. Marginal Social Benefit
3. How is Marginal Social Cost calculated?
4. How is Marginal Social Benefit calcuated?
5. Explain in relation to the following industries how externalities are
generated. Consider both positive and negative externalities in your
answer
a. Building of a Third Runway at Heathrow
b. A Nuclear Power Plant
c. Stepping Hill Hospital
6. Draw an externality diagram to show how over production will lead to
negative externalities
Market
Failure
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2. ECON1
WWW.AQUINASECONOMICSAS.CO.UK
@AQUINASECONOMIC
7. Draw an externality diagram to show a positive externality
8. Explain using the terms Ex-ante and Ex-post why it can be diffciult to
assess and judge the impact of externalities?