Question

1.Discuss one negative and one positive externality that you have witnessed recently that has not already been used in the book or power points. Who are the third parties affected by these externalities? Why does the externality exist? Is there any possibility of eliminating the externality if it is an external cost? How could government intervene to try to correct for the market failure in these cases?

2.What is the free-rider problem and what causes it? Give someORIGINAL examples (ones that you come up with yourself that have not already been discussed in the power point or textbook) of public goods that are subject to the free-rider problem. If we leave it to the private market to pay for public goods, what market outcome would you expect in regard to the examples of public goods that you cited above (i.e., would the good be overproduced or underproduced)? Suggest one idea about how we can correct the problem of public goods? Also, try to give at least one original example/explanation of the Tragedy of the Commons.

Answer 1

Q1

Ans- As we know externality is know as process where the third party or parties bear the cost or benfit of something which has not been incurred or chosen, in layman language it is an cost or benifit which has been by the producers (goods/services) and has to beared by third parties and this third party don't choose to so this.

Ever factors has some positives and negative impact. Hence here is one positive factor of externality.

A) here are an NGOs named "Blue Cross" Who protects the stray dogs and animal life who died due to lack of food, accident , and winter. They take this pets and provide shelter and happy enviroment which ultimatelty leads to benifit to the animals who died due to foods because human gets aware about it safe life of animals.

Negative Impact of Externality

A) As we all corona virus which has been increasing day by day , if we human take precautions in early stage of covid as advised by government then there are so many deaths which can saved ,economy can be saved, population.

The third parties which are affected by this are

a) Economy

b) Animal race

c) humans

d) mother nature

e) Air.

Mainly this externality exist because the one who produces the goods becomes selfish and seek for more and more profit which ultimately leads to the loss for the economy or third parties. Once this selfieshness goes the externality will become strength for us.

There are ways which we can reduce the externalities but eliminating properly will take time

a) Afforestation- As we know due to the deforestation there is an expansion of ozone layer whole, which ultimately leads us to global warming hence once govt orders for tree plantation(afforestation) it leads to reduction in ozone layer whole which can be seen as per NASA current reports.

b)Desalinitation- Due to lack of drinking water in earth govt orders to desaline the ocean water (which is but costly) but it will provide the drinking water.

c) Plastic Bann- Plastic is an component which can remain on the earth for more than 800years , and it leads to pollutes the air, if buried in earth it will degrade the quality of soil, if plastic gets banned and we use the paper, cloth bages it will save enivorment ,

Govt Can intervene many ways.

a) Impose heavy taxes or cancel the license to those industries who throws there waste in water or pollute ocean.

b) Create An NGO which will keep stricts eye and monitor to those business man who pollute nature by anymeans. And report it to govt.

c) Increase the Cost of Cigareete or any elements which impacts the society .

Ans 2

Free rider is an situation where the an person produces good and services for society, while few persons take more shares and does not pay correct.

Here is an incident happens yesterday itself.

There was an lady who used to prepare yummy wada pav, and it's orginal price was rs 20,but few elments of society visit her shops and forciably purchase her vada pav at Rs10.

And learning her techinque how to prepare vada pav they started making vada pav and sells it at rs 50 per pav, and slowly slowly they she got vanished from this place. And now I dont see her.

If we lead to the private market to pay then the market will set the price based on the quality of the food, and which ultimately leads to rise of that lady and she will receive the exact price for vada pav talent

There are so many ideas which can remove or eliminate this free rider.

a) If govt make a mandate rule that per person only 30kg per month ( for eg production rice) ,if anyone take more than that then he needs to pay the doule price for that extra kg, and needs to provide the valid reason why he is taking more.

b) The Price of Food should be based on quality - If a person makes a food which quality is really good or upto mark then the price of his food should be more.