Question

write a memo provide solution of car industry externalities issue. provide hard data

Answer 1

Memo

To: xyz

From: abc

Date: 28/02/2018

Subject: Solution of car industry externalities issue.

Summary

This memo will discuss about the solution of car industry externalities issues. The issues like maximum efficiency, market failure. Externalities rise when one factor make other factor fail or worsen the situation. Externalities are example of market failure.

Introduction

Externalities have two classes of toolsin the government arsenal: price based and quantity based measure. However, it depends on certain factors such as flexibility, uncertainty of costs.

Suggestions

Policy formulation on taxation. Corrective tax or subsidy equal to marginal damage per unit. Regulations on quantity of the product. Proper command and control is one of the way. Maintaining social optimum level. Regulations are justified when economic conditions are not feasible. Proper role of administration and reinforcement of that regulation. We cannot simply ban cars on the basis of negative externalities because it may influence the costs of other cars.Pigouvian taxes are difficult in estimating the value of the cost which is the major drawback. Government action lead the industry to fully reflect the external costs or benefit's of that party's action. The solution to externalities does not depend on the property rights owned by parties, as long as one have the legal rights.

Here, I am providing hard data from few of my survey.