Question

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Is it always necessary for government to intervene and internalize the profit and the cost externalities? Illustrate your answer using a real world example.

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Answer 1

Answer:-

Truly, it is constantly necessary for government to intervene and internalize the profit and the cost externalities. Profits and cost both ought to go next to each other or stay adjusted for a feasible monetary development. Take the instance of an industry creating various kinds of synthetic compounds or electronic products. These businesses produce so much air contamination that it makes both physical and psychological well-being issues.

In this circumstance, it is exceptionally significant for the government to meddle and take appropriate activities. It needs to caution the business proprietor and drop every one of its licenses. This may put a terrible effect on the economy on the grounds that the business faces misfortunes. To forestall this sort of circumstance, the industry needs to adjust both profit and cost externalities.

So also, general wellbeing is influenced by transportation vehicles. Here, government needs to intervene to monitor air contamination. It needs to fine vehicle proprietors, drop the driving permit of the drivers if their vehicle delivers more contamination than as far as possible. They might be urged to redesign their vehicle if their vehicle is too old or faulty.

Along these lines, government mediation is exceptionally expected to keep up a harmony among profit and cost externalities.

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