Economics (AS & A Level) · Oct / Nov 2022 · Paper 33 · Question 2
9708Private costs and benefits, externalities and social costs and benefits
The transport authority in a city is considering building an underground railway to reduce traffic congestion on the roads. Which combination would represent an external cost and an external benefit of the use of this railway?
- Acompensation is paid to businesses displaced by construction work | foreign tourists pay to use the railway
- Bnearby residents suffer noise from passing trains | there are fewer admissions to hospital as air quality improves
- Covertime payments are made to workers to finish building the railway on time | productivity increases as employees arrive at work more punctually
- Dreduced traffic means there are fewer road improvements needed | motorists spend less on fuel
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Correct answer: B. nearby residents suffer noise from passing trains | there are fewer admissions to hospital as air quality improves
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