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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
Evaluate the likely private costs involved in such major power station construction projects.
Answer
Private costs refer to the expenses directly incurred by the developers in the construction and operation of the Hinkley Point C nuclear power station. These costs typically include:
- Purchase of Land: The cost associated with acquiring the land on which the power station will be built.
- Machinery and Construction: Investments in heavy machinery for construction and costs associated with building infrastructure.
- Labor Costs: Wages paid to the workers during the construction phase, including skilled and unskilled labor.
- Security Costs: Expenses related to ensuring the safety and security of the construction site.
- Raw Materials: Costs for materials such as concrete, steel, and other necessary supplies for construction.
- Maintenance and Operation: Ongoing expenses during the operational phase, including employee salaries, equipment upkeep, and regulatory compliance costs.
Step 2
Evaluate the likely external costs involved in such major power station construction projects.
Answer
External costs, or externalities, are the costs that impact third parties not directly involved in the project. These may include:
- Visual Eyesore: The construction of a large nuclear power station may affect the natural landscape and aesthetic value of the surrounding area.
- Wildlife Impact: Construction can disrupt local ecosystems, impacting wildlife habitats and causing loss of biodiversity.
- Local Property Prices: There may be a potential decrease in local property values due to negative perceptions of living near a nuclear facility.
- Air Pollution: Although nuclear power is generally low in emissions, the construction phase may still produce pollutants that affect air quality.
- Road Congestion: Increased traffic from construction activities may lead to congestion on local roads, affecting local transport.
- Risk of Leak or Contamination: The potential for accidents, such as a leak of radioactive material, poses serious health risks, affecting the local community and environment.
Step 3
Use an appropriate externalities diagram.
Answer
To illustrate the private and external costs, an externality diagram can be utilized. The diagram would depict:
- Marginal Private Cost (MPC): This curve represents the direct costs incurred by the company, including construction and operational expenses.
- Marginal Social Cost (MSC): This curve reflects the total costs borne by society, including external costs associated with environmental and social impacts.
- Welfare Loss: The area between the MPC and MSC curves indicates the welfare loss from not taking externalities into account in the construction and operation of the power station. This diagram visually captures the divergence between private and social costs, underscoring the need for regulatory or corrective measures to account for these externalities.