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精编密训教材,分阶快递。Chapter 7 Government and Public Sector: Market Failure, Rents, Externalities, Public Goods, Efficiency
●Problem to address
If the market fails, say, not everyone is satisfied with the outcome of a market system, or there are externalities, the market will not be the vehicle of efficiency. The government may then intervene to promote a desirable social outcome.
●Externalities
In an externality, either the buyer or the seller doesn’t capture all of the benefits or costs of a transaction; some of the benefits or costs accrue to the public as social costs or benefits.
Positive externality would be the granting of a subsidy to private producers in order to continue production for this positive externality.
In a negative externality, the government might impose a tax to improve economic efficiency. The greater the tax is, the greater incentive for the firm to control the negative externality.