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4. What are externalities, and how do they typically affect the price of a good or service?

Using the data and your own economic knowledge, assess the case for financing universities mainly through charging fees to their students.

The process of transferring the cost of metal ores and other minerals removed from the earth to an

4. You are now familiar with government and how it plays a role in our economy. What are the advantages and disadvantages of governmental involvement? What changes would you make to improve government’s role?

If the government designates certain areas within a community to be "wetlands," and therefore illegal to build upon, what happens to land not classified as "wetlands" within the community?

A ____________ externality exists when third parties are benefited by a transaction that they did not directly undertake.

Externality can be either positive or negative. If one is building a plant to extract oil from the ground, the positive externality is the added jobs for the community. However, the potential pollution from the plant could be conceived as negative. The externality affect is when one does not control the impact from another person or companies decision. Another positive externality is the improvement of a workforce in an organization that employs local labor. Pollution is widely viewed as the top negative externality.

The result is an unfair distribution of impacts that does not maximize social surplus. Weimer and Vining call externalities a “missing market” (p. 92). It is feasible to imagine externalities being accounted for by a private market, in cases where, for example, an externality is manifested into a change in land value. However, these cases are exceptional. Governmental must typically step in to value externalities, such as charging fines for polluting industry, in order to account for social costs and benefits.

In conclusion, the consumption of cars creates both positive and negative externalities. However the negative externalities it is more than its positive externalities so producers tend to overvalue and over produce. The government tries to intervene by imposing taxes on the production of cars. However this is not usually effective as the imposion of taxes depends on the elasticity of the product.The demand of cars is not price elastic.

Negative externalities are detrimental third-party effects caused by the production and/or consumption of a good. A public good is a good provided free of charge to the consumer, by the government. A public good is non-excludable and non-rivalrous. A merit good is a good that gives positive externalities upon production and/or consumption. A merit good is non-excludable, yet rivalrous.

As seen from figure one, negative externality creates a social marginal cost that is substantially higher than the actual level of coal-seam gas mining (private marginal cost). It is evident that coal seam mining has an ‘un-priced’ cost, which is not included in the private marginal cost. Therefore, it results in a larger quantity being traded ‘Q1’, compared to what is considered as the quantity desirable from a social standpoint ‘Q2’.

III. EXTERNAL ENVIRONMENT A. Societal Environment Economic Opportunities George W. Bush has been elected as the new President of the United States. One of his goals is to implement a tax-relief program that will help stimulate consumer spending (Bush). This could increase the amount of air traffic if consumers choose to spend this unexpected income on travel. This could then boost airline revenues and allow for more completed purchases on Boeing's commercial aircraft.

(C) Externalities -- Companies produce some type of external cost that affects the community. The company would not voluntarily reduce or

An Externality is when costs or benefits of certain activities spill or fall into third parties that have nothing to do with the initial situation in hand; its like a side effect or consequence of an activity that affects other parties who did not choose to incur that cost or benefit.

(ii) Government production at lower priceswe have a direct governmental influence on allocation because the government itself undertakes the responsibility of the production of the positive external good. supplies it at a lower price, in some cases free of charge