Economics 0455 · IGCSE · Market failure

Market failure — practice question

A major highway was constructed for US$175 million linking Nairobi, Kenya, with its suburbs. It cuts journey times and improves safety, although it creates environmental difficulties for small enterprises located along the route. Who is affected by the external costs of this project?

  • Athe authorities who paid for the highway
  • Bthe commuters who travel to work in Nairobi
  • Cthe construction companies that built the highway
  • Dthe small enterprises along the route

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