Gce Model Questions Vol1 2017 Economics Question 37
Practice objective / multiple choice question 37 from the 2017 Gce Model Questions Vol1 Economics examination.
A new railway line of length \(100\) km is being considered. Fixed annual cost is \(\text{£}500\) million and the variable cost is \(\text{£}2\) million per km. Expected annual ridership at a fare of \(\text{£}5\) per trip is \(20\) million trips. Demand is price‑elastic: a \(10\%\) increase in fare reduces ridership by \(8\%\). Each trip also generates an external benefit valued at \(\text{£}0.5\).\n\nDetermine the fare that maximises net social benefit and state whether the project is socially viable (i.e., net social benefit positive or negative).
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About This Question
This is Gce Model Questions Vol1 2017 Economics Question 37. It is one of the objective questions from the 2017 Gce Model Questions Vol1 Economics examination.
Difficulty level: Hard .
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