Question

4. Private Policies toward Externality a. Name three private policies toward externality b. Explain two policies of your choice

Answer 1

Externality is any action that affects other groups besides those involved directly in an economic transaction. Some of its exemplary caves include smoking, pollution, drunk and drive, noise pollution and all other related pollution The fact that societal loss is not compensated by the creator of such externality makes the case stronger for the government to intervene. b) There are externalities that unintentionally ban others and so they arc considered to leave negative consequences. These arc called negative externalities. Some of its exemplary eases include smoking, pollution, drunk and drive, noise pollution and all oilier related pollution. On the other side, there are externalities that generates positive spill over effects beyond the creator of the externality which have greater marginal lieu fit to the society than the individual Ibices are called positive externalities. These include education, technological spill over etc. Question 2 a) When resource allocation becomes inefficient market failure occurs. Possible reasons