We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

Externalities - Research Paper Example

Comments (0)
Summary
EXTERNALITIES Name Institution Date EXTERNALITIES Introduction Externality refers to the situation in which the action of one economic agent directly affects another agent either positively or negatively but the first agent neither bears the cost nor receives the benefits…
Download full paper
GRAB THE BEST PAPER
Externalities
Read TextPreview

Extract of sample
Externalities

Download file to see previous pages... They can also be referred to as the spill-over effects in the economy. Negative externalities results social costs to the society exceeding the private costs while positive externalities results in social benefits exceeding the private benefits. A case of negative externality can be illustrated by the graph shown below. Externalities and their solutions Air pollution is one of the major forms of negative externality. It arises from the burning of fossil fuels. Smoke from motor vehicles results to negative effects on the health of the road users leading to cancerous infections. The owners of the motor vehicles do not bear the cost of medical treatment to those affected. Smoke from cigarettes imposes a cost on the non-smokers who have to bear the cost of treating diseases due to smoke. This form of externality can be mitigated through the imposition of taxes commonly known as Pigovian tax which is usually set at a figure close to the cost of that externality. However this has a challenge in determining the actual amount of tax to be imposed (Papandreou, 1998). The tax is also applied in anon progressive manner which makes it less equitable. Some firms are forced to pay more than what they are supposed to pay in actual terms. Finally it may not be social optimal by the fact that some firms may layoff their employees so as to meet the cost of taxation. Due to these weaknesses of taxation, it is not emphasized by the government but instead a lot of emphasis is made on regulation. The government regulates the amount of production and consumption leading to externalities. This can be in form of quantity regulation in which the government can force the firms to produce the socially efficient quantity instead of taxing it forcing the firm to internalize the cost of the externality. Carbon emissions are another form of negative externality. Carbon emission from firms pollutes the surrounding environment resulting to an increase in social costs accruing to the third parties and it also forms part of greenhouses gases that promote global warming. Negative changes in the environment due to climatic condition variations can be attributed to carbon dioxide emissions. Coase Theorem provides a means by which this externality can be controlled; it lays emphasis on the need to have externalities internalized by the firms that produce them if the form of tradable emission permits. The theorem however has some limitations such as the free rider problem in which some agents can enjoy the benefits of a free environment without contributing towards it. It tends to work best in situations where externalities are not global but are in existence in a smaller context. Use of carbon trading provides a means of is to create a means putting a price on carbon emission. Thus it assists in internalizing environmental costs of firm and results in lower emissions. The government may also levy fees on each unit of pollutants that is being emitted into the surrounding environment. Setting emission standards provides a means of limiting the amount of pollutants emerging from a firm. Another form of negative externality is water pollution which results in the death of aquatic life as well as having some negative effects on the environment. Industrial effluents emitted by firms into major water bodies causes disease outbreaks. Acidic rain which is caused by water pollution brings about deforestation thus causing serious environmental degradation. Household water ...Download file to see next pagesRead More
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Free Market Economy
As the author puts it, free market economy is in total contrast to controlled market in which the government indirectly or directly controls demand, supply or prices. According to Adam Smith, the free market system supports the growth of monopolies, cartel-type activities, and mergers.
12 Pages(3000 words)Research Paper
The impact of the Financial Crisis on Banking Industry
Also the lower level of investment is creating negative effects on the level of production and thus on the amounts of banking deposits (Bexley et al., 2011, p. 2). This paper is aimed at describing the effects of the financial crisis on banking industry. The issue and positive and negative externalities: The list of disturbed banks on the watch list of the regulatory agencies is at a strangely high stage as well as is the absolute number of banks which are bankrupt and are forced to close.
3 Pages(750 words)Research Paper
Enviromental Economics Problem
Based on the three different solid waste management scenarios, the effect of mining on Al-Ahmad city and the how health waste affects Kuwait this paper looks at the economic factors involved in it and how market failure has contributed to this. There are various environmental issues facing Kuwait and all these have different externalities.
6 Pages(1500 words)Research Paper
Economics - Telecommunications Industry Research
logical improvement (it can be the use of optical fibers which can carry a large volume of data and likely to be user-friendly or something like communication satellites) and market competition. The introduction of mobile network played a crucial role for the betterment of the
10 Pages(2500 words)Research Paper
Capital Budgeting Projects
However, the governments in appraising their projects face the problems of measuring the cost and benefits and in r determining the costs. San Diego capital improvement
1 Pages(250 words)Research Paper
The trend of agricultural expansion in the US South and its relation to the slave movement from 1850 to 1860
Indeed, agriculture is a critical pillar that defines economic performance in several settings. It contributes to the GDP growth. Furthermore, Agriculture is a fundamental pillar led to heavy migration in US to enhance cotton
10 Pages(2500 words)Research Paper
3.2: Course Project Business and the Constitution and Administrative Law
tutional laws in order to enhance their smooth operations because business owners/managers are also entitled to due legal process guaranteed to them by the Bill of Rights. Although there is no constitution law for individuals and businesses, the operations of the business is
2 Pages(500 words)Research Paper
Positive and negative externalities
Positive externalities are actions on product which are beneficial to the third party (Tulkens & Chander, 2006). This paper will identify and discuss three externalities that exist in particular
3 Pages(750 words)Research Paper
Individual Differences in Human Sexuality
Thus said, the market also produces negative externalities that affect people negatively in their day to day activities. For example, pollution of air by manufacturing industries leads to human suffering and animal and plant death. Therefore, though the free market is
3 Pages(750 words)Research Paper
Let us find you another Research Paper on topic Externalities for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us