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    production, buying, and selling

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    Sometimes market activities (production, buying, and selling) have unintended positive or negative effects outside the market's scope. These are called externalities. As a policy maker concerned with correcting the effects of gases and particulates emitted by and local power plant, answer the following questions:
    1. What two policies could you use to reduce the total amount of emissions?
    2. Why do you think they each would work?
    3. What would the benefits of each action be (besides emissions reduction)?
    4. What would the costs of each action be?
    5. How would you decide what was the best level of emission reduction?

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    Solution Preview

    Sometimes market activities (production, buying, and selling) have unintended positive or negative effects outside the market's scope. These are called externalities. As a policy maker concerned with correcting the effects of gases and particulates emitted by and local power plant, answer the following questions:
    1. What two policies could you use to reduce the total amount of emissions?
    In these situations the marginal social benefit of consumption is less than the marginal private benefit of consumption. This leads to the good or service being ...

    Solution Summary

    This solution exemplifies market activities (production, buying, and selling). References are also provided to further validate the findings.

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