Purchase Solution

Externalities: Interventions

Not what you're looking for?

Ask Custom Question

Positive and negative externalities lead free markets to divert from allocative efficiency. The possible role that government could play in improving allocative effiency where market failure exists. Answer the following questions and provide APA format (100 words each)

Are there markets where the divergence from allocative efficiency should be left alone (gov't stay out)?

Are there markets where the divergence is so great that gov't absolutely should interfere?

Are there actions that gov't could take in any of the markets you talk about (above) that would facilitate a private solution?

Purchase this Solution
Solution Summary

This solution explains compensating for externalities. The sources used are also included in the solution.

Solution Preview

In accordance with BrainMass standards this is not a hand in ready assignment but is only background help.

Step 1
There are markets where the divergence from allocative efficiency should be left alone. Allocative efficiency is a state of economy in which production is made in accordance with consumer preferences. Every good or service is produced up to the point where the last unit gives a marginal benefit to the consumers (a). There are situations in which marginal inefficiency is created for marketing purposes. For example, in monopolistic competition, there is some product differentiation that is created to charge a slightly higher price. In such situations the government should stay out. In situations where by shifting resources in the economy, a gain in benefit to one person is greater than ...

Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

View More Free Quizzes
Related BrainMass Solutions

  • Externalities, Positive and Negative

    Why do externalities exist? Externalities are costs that are not captured in market prices. Postitive externalities are those that would make a price lower than it should be.

  • Negative Externalities and Urban Travel

    How are total negative externalities affected by the public funding of buses and subways? Total negative externalities are affected by public funding of buses and subways by reducing the total negative externalities.

  • The Role of the Government with Respect to Externalities

    This gives rise to externalities that result in market failure. Task: Explain the reasons for under-allocation of the economy's scarce resources in case of benefit externalities, and their over-allocation in the case of cost externalities.

  • Market Failures and Government Intervention

    Externalities. Negative externalities, such as pollution, harm society but their cost is not borne by the firms that produce them.

  • Negative and Positive Externalities

    Externalities defined with examples

  • Conventional Market-Based Policies vs. Sustainability

    Revisiting Externalities. Journal of Public Economic Theory, 1(2), 225-246. An explanation of externality, with an examples of positive and negative externalities.

  • Externality, Market Failures and Economic Regulation

    Externalities are of two types: Positive Externalities - Positive externalities exist when the benefit of all the acitivities of the producer is not realizable in the revenue and the producer expects intervention from the government to help realize

  • cost of externalities

    156821 cost of externalities "The reason the government has to step in and 'internalize' benefit and cost externalities is because people are basically selfish." Do you agree with this statement? Explain.

  • Massachusetts Tolls and Externalities

    The toll functions as a stand-in for those externalities that a typical person wouldn't consider. Tolls and externalities in Massachusetts are examined.

View More Related Solutions