Concerning market failures, what divergences arise between equilibrium output and efficient output when (a) negative externalities and (b) positive externalities are present?

How might government correct these divergences?

Cite an example (other than the text examples) of an external cost and an external benefit

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Elin HesselLv2

10 Jun 2018

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Related questions

In Chapter 6, Boyes focuses on negative externalities such as the various types of pollution. However, as we discussed during our online session, we can also observe positive externalities in which external benefits are generated for people. Which of the following is NOT an example of a positive externality?

	A.	Workers can help one another to "cover the phones" and make sure that someone is always available to help clients
	B.	Workers can provide ideas to one another about how to solve problems
	C.	Workers can form carpools and use other means to reduce commuting costs
	D.	All of these cases are examples of positive externalities

Answer the following problem based on Externalities and Public Goods that we discussed in class:

	Rival	Non-Rival
Excludable
Non-Excludable

Fill in the table to represent each of the four types of goods. Use examples to earn full credit.

What is the difference between a positive and a negative externality? Give examples to earn full credit.

How does the free rider problem relate to goods that non-excludable with non-rivalry?

How does moral hazard relate to goods that are excludable with non-rivalry?

How does the marginal-cost marginal-benefit rule apply to avoid demand-side and supply-side market failures?

Externalities are costs or benefits that are caused by producing or consuming a good but that are not included in the market price for the good. They are simply the unintended side effects of market activities. Externalities can be positive or negative. One example of a positive externality might be when beekeepers provide a means of pollination for fruit growers. Air, water, and noise pollution are examples of negative externalities.

Please answer the following questions to describe an instance in which you, an acquaintance, or family member has experienced an externality. Please use economic concepts, and use references in your main contribution.

How did it affect you (or your acquaintance or family member?) Please explain.

What were the effects? Please explain.

Did you (or your acquaintance or family member) experience increased or decreased health or quality of life? Please explain.

If you choose to write about a negative externality such as pollution, what do you think is the best way to reduce pollution? Please explain.

If you choose to write about a positive externality, what is the economic problem that positive externalities create? How would you resolve that? Please explain.