Sales of bottled water in China were twice as high in 2015 as they had been in 2010. In 2013 China moved ahead of the USA to become the largest market for water by volume, though not by value because a bottle cost more in the USA. The rise in worldwide bottled-water consumption has increased the size of firms producing bottled water, but it has also raised pollution.
(a)[2]
Why does pollution count as market failure?
(b)[4]
Explain two causes of a supply curve shifting to the right.
(c)[6]
Analyse why a product may be priced higher in the USA than in China.
(d)[8]
Discuss whether consumers gain more from large firms or from small firms.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Pollution is an external cost, because it has a harmful effect on a third party” …