A negative externality occurs whenever the activity of one economic agent has a negative effect on the well-being of a third party.
Whenever production creates negative externalities the marginal social cost of production is greater than the marginal private cost.
In free markets, firms only consider the private costs of production and therefore produce at the point where demand is equal to marginal private cost.
However, production at this level represents an inefficient allocation of resources since the price charged does not equal the full marginal social cost of production.
marlinbito answered the question on July 8, 2018 at 18:50
- Explain what is meant by productive and allocative efficiency(Solved)
Explain what is meant by productive and allocative efficiency
Date posted: July 8, 2018. Answers (1)
- Critically examine the impact of globalisation on Less Developed Countries (LDCs)(Solved)
Critically examine the impact of globalisation on Less Developed Countries (LDCs)
Date posted: July 8, 2018. Answers (1)
- Critically examine the view that a deficit on the current account of the balance of payments is of no economic significance.(Solved)
Critically examine the view that a deficit on the current account of the balance of payments is of no economic significance.
Date posted: July 8, 2018. Answers (1)
- Explain the difference between the current account and the financial account in the
UK balance of payments.(Solved)
Explain the difference between the current account and the financial account in the
UK balance of payments.
Date posted: July 8, 2018. Answers (1)
- Explain the difference between fixed and floating exchange rates. (Solved)
Explain the difference between fixed and floating exchange rates.
Date posted: July 8, 2018. Answers (1)
- Explain how the short run price and output decisions of a profit maximising firm would differ from those of a revenue maximising firm(Solved)
Explain how the short run price and output decisions of a profit maximising firm would differ from those of a revenue maximising firm
Date posted: July 8, 2018. Answers (1)
- Critically examine the view that mergers are against the public interest and should be outlawed(Solved)
Critically examine the view that mergers are against the public interest and should be outlawed
Date posted: July 8, 2018. Answers (1)
- Explain the difference between organic growth and growth by acquisition or merger(Solved)
Explain the difference between organic growth and growth by acquisition or merger
Date posted: July 8, 2018. Answers (1)
- Evaluate the policies that governments could use to deal with market dominance and the abuse of monopoly power(Solved)
Evaluate the policies that governments could use to deal with market dominance and the abuse of monopoly power
Date posted: July 8, 2018. Answers (1)
- Explain why some industries are natural monopolies.(Solved)
Explain why some industries are natural monopolies.
Date posted: July 8, 2018. Answers (1)
- Analyse how government policy could reduce income inequality.(Solved)
Analyse how government policy could reduce income inequality.
Date posted: July 6, 2018. Answers (1)
- Explain what is meant by the distribution of income.(Solved)
Explain what is meant by the distribution of income.
Date posted: July 6, 2018. Answers (1)
- Using appropriate examples, explain some of the methods a government could use to increase the consumption of merit goods.(Solved)
Using appropriate examples, explain some of the methods a government could use to increase the consumption of merit goods.
Date posted: July 6, 2018. Answers (1)
- Explain what is meant by a merit good(Solved)
Explain what is meant by a merit good
Date posted: July 6, 2018. Answers (1)
- Critically examine the view that the government should not intervene in labour markets.(Solved)
Critically examine the view that the government should not intervene in labour markets.
Date posted: July 6, 2018. Answers (1)
- Analyse how labour markets might be affected by a decrease in the supply of migrant workers.(Solved)
Analyse how labour markets might be affected by a decrease in the supply of migrant workers.
Date posted: July 6, 2018. Answers (1)
- Evaluate the view that trade liberalisation alone is insufficient to ensure development of poorer countries.(Solved)
Evaluate the view that trade liberalisation alone is insufficient to ensure development of poorer countries.
Date posted: July 6, 2018. Answers (1)
- Explain the roles of the International Monetary Fund and the World Bank.(Solved)
Explain the roles of the International Monetary Fund and the World Bank.
Date posted: July 6, 2018. Answers (1)
- Critically examine the desirability of the world’s major economies introducing a system of fixed exchange rates.(Solved)
Critically examine the desirability of the world’s major economies introducing a system of fixed exchange rates.
Date posted: July 6, 2018. Answers (1)
- Explain the main reasons why nations engage in international trade(Solved)
Explain the main reasons why nations engage in international trade
Date posted: July 6, 2018. Answers (1)