External cost or external benefit, Microeconomics

Explain externality, how can government intervene to achieve allocative efficiency in case of external cost or external benefit?

Answer

The term externalities refers to both external economies and diseconomies. When the action of an economic decision maker creates benefits for others, without being compensated it creates an external economy for others. When the action of an individual creates costs for others for which he does not pay, it creates an external diseconomy.

Government can intervene to achieve allocative efficiency by the following ways-

1) Imposing taxes.

2) Providing subsidies.

3) Setting quotas limits.

 

Posted Date: 3/12/2013 4:00:19 AM | Location : United States







Related Discussions:- External cost or external benefit, Assignment Help, Ask Question on External cost or external benefit, Get Answer, Expert's Help, External cost or external benefit Discussions

Write discussion on External cost or external benefit
Your posts are moderated
Related Questions
Determinants of Private Demand - Linkages with Employment Employment potential of courses in higher education is an important determinant of private investment in higher educa

Economic appraisal - Appraisal , which seeks to quantify, and where possible calculate the welfare impacts from, the costs and benefits of a project or policy.

What should be the decent/appropriate growth rate in any country?  Answer:   A growth rate of among 2-3% is considered normal for mature developed countries; for LICs, 5-7% is

Q. What do you meant by Informal Economy? Informal Economy:Informal sector of the economy represents the production of services and goods for the own-use of the producers or fo

Unemployment: Individuals who want to be employed, and are actively seeking work, but can't find a job, are considered ‘officially' unemployed. Individuals who aren't working, but


what is stagnation thesis?

compare and contrast between cordinal and ordinal approaches