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Negative externalities are seen as an example of market failure. Discuss, with examples, the policies a government could use to improve the misallocation of resources.
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Negative externalities are seen as an example of market failure. Discuss, with examples, the policies a government could use to improve the misallocation of resources. Private actions, which are conceived in order to eliminate the problem caused by external effects are significant, but often fail to attain their ultimate goals. Generally speaking, it is difficult to organize a strong movement against harmful company practices. After all, the external costs, as well as the external benefits, quite often have an impact on a large number of people. Therefore all who suffer because of these costs cannot easily be tallied. It is not easy to count everyone who has suffered from the smoke and soot coming from factory chimneys. In this case government interference is usually required. There are quite a few methods of calculating the external effects and in every specific case the government should choose the most appropriate. It would be...
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