preview

Externality Of Currency

Decent Essays
All throughout history there have been a few different types of currency in America that have been taken out of the monetary cycle, such as the half cent. The reasons were because the cost of the currency being produced was higher than the actual face value of the currency. As many historians say, “history repeats itself” is because it actually has! In 2005 was when the penny finally reached the cost of one cent in order to produce one penny. In 2011, it costed about 2.4 cents to make one penny. This was because the price of zinc increased, or the US dollar has gone down in value. The penny would be considered a negative externality, because the US Mint keeps making the decision to keep producing them and they do not have to pay the full cost of continuously producing the penny. This occurs, because the currency being produced comes from the US citizens taxes. Since the penny is a negative externality, the cost to society is greater than the cost a consumer is actually…show more content…
Since US Mint only pays for the marginal private cost of producing the pennies, it will produce where the marginal private cost is equal to the marginal private benefit. But since there is a negative externality, the marginal private cost is not the same as the marginal social cost. Since pennies have become a market failure, government intervention needs to be implemented in order to correct the market failure quantity to move more towards the social quantity which always has the opportunity to move the penny market closer to a more efficient solution and reduce deadweight losses. Also, I believe that the government needs to intervene and completely abolish the production of pennies and have every product sold for every business round up to the nearest five
Get Access