Question

In: Economics

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Please I need today answer for This question and it is very important and I need solution for this issue with all the details , and help me with all the details.Please write your answer to me by typing, not by handwriting, so that I can read and understand your answer clearly.BR/Hassan

Externalities :

a) Define a negative production externality.

b) Why do markets not always manage to solve the problem of externalities on their own?

c) Under which conditions does smoking lead to externalities in terms of health care costs and workplace productivity? What type of externality is smoking?

Solutions

Expert Solution

  1. Negative production externality is caused whem third party suffers an cost due to an economic transaction between producer and customer. For example, when alcohol is produced and consuked by customer it creates larger rate of accidents on road causing harm to society.
  2. Markets dont manage to solve problems of externality on their own as it requires strong action and compliance to litigate against alleged. Moreover the creator lf externality lpoks to maximise profits and ensure sustainability which reduces self correction.
  3. Smoking reduces mental potential and stresses the individuals which causes side effects and thus reduces workplaces productivity and harms health drastically in way which lowers their shelf life. It is thus categorised as negative externality as third party passively smokes unintentionally which harms his or her health.

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