(a)[4]
Explain what is meant by the ‘principal-agent’ problem and describe how it can be applied to governments and private sector businesses.
(b)[4]
Outline what the article means when it mentions ‘inefficient resource allocation’.
(c)[6]
The article refers to ‘internalising external costs’. Explain what economists mean by this and consider whether cost-benefit analysis can be used to achieve it.
(d)[6]
Consider whether the article gives enough evidence to conclude that market failure theory (MFT) is inadequate as a government policy tool.