Question

Please provide and discuss two examples of positive externalities and two examples of negative externalities. Choose any two of these four examples and discuss what the government could do to correct these market failures.

Answer 1

And externality is a situation when there is a transaction between the first two parties and effect can be seen on the third party as well.

if this is an positive externality, then the effect is positive the third party and if the externality is negative ,then the third party can be negatively affected .

example of positive externalities -

1.suppose in an area ,two persons are living,the neighbor of 1st person is having a very beautiful garden then thefragrance of the flowers can also felt by the third party living near them the .

2.second example of positive personality can be when there is a bilateral agreement se between two countries in sectors like energy then the benefit can be received by the people living inside those countries .

Negative externality examples-

1.Say a factory is installed near a village and it is discharging all its waste in the near river of the village,then it is negatively affecting the people live inside the village because water is polluted and if the water is consumed by the village peoples then it can cause different type of illness and problems .

2.when any person drives a car and emits carbon dioxide then there is a transaction cost between car company and person but the negative impact can be seen by the the the pollution which is caused by the vehicle to the people around that person.

• From the Different type of water pollution and air pollution examples what mentioned here the government can take measure like imposing tax and banning them if it is required