Non-renewable energy (e.g. coal) is believed to create a larger social cost than renewable energy (e.g. solar or wind power). Excessive demand for non-renewable energy leads to a failure of the market economic system. By contrast, producers of renewable energy, some of which specialise in one form of energy, are starting to produce on a larger scale.
(a)[2]
Define what is meant by social cost.
(b)[4]
Explain two reasons why a firm would choose to specialise in producing only one product.
(c)[6]
Analyse how firms' ability to produce on a larger scale benefits consumers.
(d)[8]
Discuss whether the operation of a market economic system does more harm than good to an economy.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Total of private and external costs” …