Economics 2281 · O Level · Market failure

Market failure — practice question

An airline improves its service by using larger aircraft. The airline says this will cut catering waste and reduce carbon ($\text{CO}_2$) emissions per passenger journey, even though fares may increase. State a private cost and an external benefit of this decision?

  • Aprivate cost: bigger aircraft; external benefit: higher fares
  • Bprivate cost: higher fares; external benefit: lower $\text{CO}_2$
  • Cprivate cost: less catering waste; external benefit: bigger aircraft
  • Dprivate cost: lower $\text{CO}_2$; external benefit: less catering waste

Worked solution & mark scheme

This 1-mark question has a full step-by-step worked solution and mark scheme.

  • Full mark scheme, point by point
  • Step-by-step worked solution
  • Write your answer & get it marked instantly by AI