1. What 2 kinds of government policy can internalize an externality? Give an example of "Positive Externalities" for private goods. Which policy do you recommend in this case? Explain. The two main government policies is taxation and subsidy. The tax policy, a cost, regulates the actions such as limiting toxic wastes. The second is subsidy policy, a benefit, in which, the government offer incentives, for those who reduce the external cost and benefiting society.
An example of positive externality is the building of a new fire department or emergency health care facility in a neighbor to improve the accessibility and efficiency of emergency care. This should be a subsidy policy because it will benefit more than just the people who are in desperate need, which will promote a positive externality.
2. What 2 kinds of government policy can internalize an externality? Give an example of "Negative Externalities" for private goods. Which policy do you recommend in this case? Explain. The two main government policies is taxation and subsidy. The tax policy regulates the actions such as limiting toxic wastes. The second is subsidy policy, in which, the government offer incentives, for those who reduce the external cost and benefiting society.
An example of negative externality is the air pollution that comes from the smoke stacks of a manufacturing facility, imposes costs to the third party. In order to prevent such negative externalities, a government can use the tax policies
4. What are externalities, and how do they typically affect the price of a good or service?
Subsidies are defined as a sum of money granted by the government to support an industry or business so that the price of a good or service remains low and therefore competitive. (Oxford Online Dictionary, n. d.) Nevertheless, subsidies can vary in their form and the most common ones are for example direct payments in cash or kind, governmental provisions of goods or services of prices below the normal market price, governmental purchases of goods or services in excess of the market price and tax concessions. (Britannica, 2014) Consequently, subsidies are crucial for business sectors, such as agriculture, energy and transportation as a way of financing their operations and thus offering products to affordable prices. Especially, the primary
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?
In this assignment I am going to analyse how government policies are developed, covering all aspects of the policy making process.
Negative externalities are costs imposed upon an individual or group that is outside or external to a transaction.
The government solely protects the rights of the employees and consumers and offer of public goods. Government spending and expenditure are one way by which the government control market economies, with increased spending to increase cash flow in the economy, and increased expenditures to minimize cash flow in the economy. Such increases
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.
Government intervention corrects market failure resulting in environmental sustainability and improved accessibility to services. Goods or services with negative externalities are market failures because the operation of the price mechanism
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.
(C) Externalities -- Companies produce some type of external cost that affects the community. The company would not voluntarily reduce or
in an effort to solve problems, which can be seen with the Clean Water Act.
There are also solutions to a positive externality. That is to get the decision maker to internalize the external effect. The difference with this and the negative externality is that with the negative externality they would have to try to get the decision maker to see higher costs and with the positive externality the government needs to somehow make the decision more appealing to the private decision-maker.
The presence of competition in the indirect tax within the export and import zones leads to the creation of horizontal tax externalities. Vertical tax externalities may also arise between the central and regional government. In most of the cases, both countries tend to maximize revenue through tax collection through purchasing and selling of goods. One party may therefore set policies that aim at in increasing tax collection (Lucas 369). Likewise, the government may also balance the availability of imports in the country by employing certain regulations that minimizes their
The presence of competition in the indirect tax within the export and import zones leads to the creation of horizontal tax externalities. Vertical tax externalities may also arise between the central and regional government. In most of the cases, both countries tend to maximize revenue through tax collection through purchasing and selling of goods. One party may therefore set policies that aim at in increasing tax collection (Lucas 369). Likewise, the government may also balance the availability of imports in the country by employing certain regulations that minimizes their
externalities keep the market from reaching allocative efficiency because the gains or losses generated are external to the pricing system; they are unpriceable. The transaction costs of externalities misallocation of resources or a failure of the market economy to generate a Pareto optimum. positive externalities 3 types of interventions the government may engage in: