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Edexcel A-Level Economics AS 1.3.5 2d Use of Diagrams Using Marginal Analysis to Illustrate the External Benefits From Questions

Practise using marginal-benefit and marginal-cost diagrams to locate market and social optima, explain misallocation and identify welfare areas.

Syllabus
First assessment 2019
Course
Economics YEC11
Level
AS

Exam points

  • draw MSB above MPB to show underconsumption, the social optimum and the welfare area
  • draw MSC above MPC to show overproduction, the social optimum and welfare loss
  • develop contextual chains from external benefits or costs to third-party and output effects
  • evaluate welfare effects using magnitude, measurement, time horizon and countervailing benefits

Edexcel A-Level Economics AS 1.3.5 2d Use of Diagrams Using Marginal Analysis to Illustrate the External Benefits From Questions question 1

[Maximum number: 1]

The diagram shows the market for museum visits in Spain.

Costs and benefits

Costs and benefits

Which one of the following can be deduced from this diagram?

A

The market equilibrium quantity is at Q2\mathrm{Q}_{2}

B

The social optimum quantity is at Q1\mathrm{Q}_{1}

C

The welfare gain area would be equal to UVW

D

The welfare gain area would be equal to UWX

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