5) Using the information, what real life example can you give about Correcting for Externalities?
Correcting for Externalities: Taxes to reduce negative externalities, such as environmental pollution; subsidies to encourage positive externalities, such as education. Externalities exist when some of the costs or benefits associated with the production or consumption of a product "spill over" to third parties other than the direct producer or consumer of the product.
Developing real estate often includes fees to the city/county for the costs of expanding roads, utility capacity, city overhead, etc.
June 19th, 2010 at 8:24 pm
Good answer. Another thing they can do is privatize the externalities… for example there are markets for pollution emissions now. Present polluters get quotas that can be sold to other firms that want to increase their production or come into the market and start polluting. This gives companies incentives to reduce their output. Environmental groups or governments can buy up quotas on the market to reduce overall emissions.
And they can also take taxes (as in your example) and mitigate the effects of pollution or compensate those that are affected.
Peace
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June 19th, 2010 at 8:58 pm
Developing real estate often includes fees to the city/county for the costs of expanding roads, utility capacity, city overhead, etc.
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June 19th, 2010 at 9:35 pm
The McDonald coffee lawsuit.
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