Question

6. Markets fail when allocative efficiency is not achieved; when a factory emits toxic smoke, a...

6. Markets fail when allocative efficiency is not achieved; when a factory emits toxic smoke, a negative externality is created. Why do economists justify a tax to penalize the factory in this case?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer : In case of negative externality the output level is higher than the socially optimal output level. In this situation if the government impose tax on production then the production cost will increase for the factory. As a result, the factory will decrease the production. Due to this reason the output level will decrease and start reaching toward the optimal output level. Hence "economists justify a tax to penalize the factory in case of negative externality".

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Question 26 26) Free markets fail when: a. there are externalities present in the market b....
Question 26 26) Free markets fail when: a. there are externalities present in the market b. they fail to provide public goods and services in the amounts society wants c. they fail to provide private goods and services in the amounts that society wants d. all of the above 3 points Question 27 27) When negative externalities are present in a market: a. too much of the good or service is produced b. an external cost is imposed on others...
1. Explain two main reasons why we need to study public finance 2. Distinguish between the...
1. Explain two main reasons why we need to study public finance 2. Distinguish between the “organic view” and “mechanistic view” of the existence of government 3. Explain the concept of market failure and discuss five reasons why there is market failure 4. What is meant by market failure? Identify and discuss four conditions under which the market fails to optimally allocate resources. 5. What is meant by the term government failure and explain five reasons why there may be...
Juanita is deciding whether to buy a skirt that she wants, as well as where to...
Juanita is deciding whether to buy a skirt that she wants, as well as where to buy it. Three stores carry the same skirt, but it is more convenient for Juanita to get to some stores than others. For example, she can go to her local store, located 15 minutes away from where she works, and pay a marked-up price of $129 for the skirt: Store Travel Time Each Way Price of a Skirt (Minutes) (Dollars per skirt) Local Department...
What tools could AA leaders have used to increase their awareness of internal and external issues?...
What tools could AA leaders have used to increase their awareness of internal and external issues? ???ALASKA AIRLINES: NAVIGATING CHANGE In the autumn of 2007, Alaska Airlines executives adjourned at the end of a long and stressful day in the midst of a multi-day strategic planning session. Most headed outside to relax, unwind and enjoy a bonfire on the shore of Semiahmoo Spit, outside the meeting venue in Blaine, a seaport town in northwest Washington state. Meanwhile, several members of...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT