Question

In: Economics

A debate rises from time to time about whether local fire departments should be privately operated,...

A debate rises from time to time about whether local fire departments should be privately operated, with services sold directly to customers. What problems would be involved in such a system? (Hint: externalities).

Solutions

Expert Solution

this is considered as a negative externality if there privately operated in this is because of the fact that privately operated entities might serve the customers only were willing to pay and let's say there is a fire accident in one place where one party is responsible to pay as a result of which they denied as they don't have the willingness to pay with which it can subsequently damage the third party people as well due to pollution and also the extension of fire. This is the reason why would be more loss even than expected which is why it isn't a good idea


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