Economics of Public Issues (19th Edition)
19th Edition
ISBN: 9780134018973
Author: Roger LeRoy Miller, Daniel K. Benjamin, Douglass C. North
Publisher: PEARSON
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Question
Chapter 21, Problem 1DQ
To determine
The benefit s of externalities to the nation in the long-run.
Expert Solution & Answer
Explanation of Solution
Subsidization refers to giving subsidy to specific industrial units. The tax revenue collected from various sources finance these subsidies. The resources can be put to various uses and at the same time they are scarce. Thus, using money to benefit single industry would not result in sustainable development.
If industry products benefit all the people of the society, then these types of products would have positive externalities. Solar panel for generating electricity is an example to this. It makes other sources of electricity generation free so that it can be used in various other forms.
Economics Concept Introduction
Concept introduction:
Externalities:
External factors that cause either a benefit or loss to the produces, but do not reflect in the market price of the good or service and not even in the accounts of the producer, are known as externalities. It may be a loss for one party and gain for the other.
The positive externality can be termed as external benefit, whereas the negative externality can be termed as external cost.
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Chapter 21 Solutions
Economics of Public Issues (19th Edition)
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