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In September 2016 the government approved the building of an £18 billion nuclear power station, Hinkley Point C, which will supply 7% of UK electricity for up to 60 years - Edexcel - A-Level Economics A - Question 7 - 2018 - Paper 1
Question 7
In September 2016 the government approved the building of an £18 billion nuclear power station, Hinkley Point C, which will supply 7% of UK electricity for up to 60 ... show full transcript
Worked Solution & Example Answer:In September 2016 the government approved the building of an £18 billion nuclear power station, Hinkley Point C, which will supply 7% of UK electricity for up to 60 years - Edexcel - A-Level Economics A - Question 7 - 2018 - Paper 1
Step 1
Understanding Private Costs
Answer
Private costs refer to the direct costs incurred by the construction and operation of the nuclear power station. In this case, these costs include:
- Purchase of land and machinery: Acquiring the land for the construction and purchasing of the necessary machinery for building the power station.
- Construction costs: This includes expenses related to building the physical structure, which can be quite significant given the scale of a nuclear facility.
- Labour costs: The wages paid to workers involved in the construction and operational phases.
- Security costs: Given the nature of nuclear power, substantial investment in security measures to protect against potential threats is necessary.
- Raw materials: Costs associated with obtaining the materials needed for construction.
Step 2
Understanding External Costs
Answer
External costs, or externalities, are the indirect costs that affect third parties not involved in the transaction. In the context of Hinkley Point C, these costs can include:
- Visual eyesore: The construction and presence of a nuclear power station may disrupt the natural landscape and be considered unsightly by local residents.
- Impact on wildlife: Building a large facility like a nuclear plant can lead to habitat destruction, affecting local ecosystems and wildlife.
- Impact on local property prices: The presence of a nuclear power station may deter potential buyers, affecting the local housing market.
- Air pollution: Although nuclear plants produce lower emissions than fossil fuels, there are still concerns about air quality during the construction phase.
- Risk of contamination: There is a potential risk associated with nuclear power plants regarding leaks or accidents, which could have severe implications for the surrounding community.
- Road congestion: Increased traffic during construction can lead to congestion and additional wear on local roads.
Step 3
Using the Externalities Diagram
Answer
An externalities diagram can help illustrate the concepts of private and external costs effectively. In such a diagram:
- Curves for MPC and MSC: The Marginal Private Cost (MPC) reflects the costs borne by the developers while the Marginal Social Cost (MSC) reflects the total cost to society, which includes externalities.
- Shifts in the curves: The MSI curve may shift upwards to indicate the additional costs society bears due to externalities.
- Welfare loss area: The area between the MPC and MSC can indicate welfare loss due to the inefficiency of resource allocation caused by external costs.
Step 4
Conclusion on Costs
Answer
In conclusion, while the Hinkley Point C nuclear power station represents a significant investment in energy infrastructure, it is essential to consider both private and external costs thoroughly. The immediate financial implications must be balanced with the broader impacts on the environment and local communities, necessitating careful evaluation and potential mitigation strategies.