CAIE A-Level Economics 7.4.3 Positive and Negative Externalities

CAIE A-Level Economics 7.4.3 Positive and Negative Externalities
Cambridge International AS & A Level Economics 9708 syllabus for exams in 2026, 2027 and 20282026–2028

Practise identifying positive or negative third-party effects, separating them from private costs and benefits and linking externalities to market failure and intervention.

How this is tested

  • identify an external benefit when a third party gains without paying for the activity
  • identify an external cost when pollution, noise or harm falls outside buyer and seller
  • use the gap between social and private measures to classify the externality and misallocation

Question 3

[Maximum number: 1]

A medical team provides vaccinations for children to prevent an outbreak of an infectious disease.

Why would this be described as a positive externality?

A

Additional benefit might be gained as the disease no longer spreads.

B

Any kind of medical help will improve the condition of the children.

C

No action would be taken unless the medical team intervened.

D

The social benefits of vaccination are less than the social costs.