Comments Tracking Changes In my opinion, the biggest market failure in US econom
ID: 1217055 • Letter: C
Question
Comments Tracking Changes In my opinion, the biggest market failure in US economy is negative externality in the form of high pollution caused by manufacturing plants, which is leading to higher carbon footprint and more global warming leading to a potential environmental disaster. The problem should be addressed by imposing higher pollution tax on every manufacturing plant that emits polluting gases and practices above a pre-set threshold limit. This tax should be progressive. The higher the pollution emitted, the higher the pollution tax. It will increase the marginal social cost for such firms who will need to lower their output and raise the price, in order to avoid, which they would tend to invest in environment- friendlier technology that helps reduce such emission, bringing down the pollution level. ironment- friendlier technology that helpsExplanation / Answer
Negative externalities are those , the cost of which ir borne by the third party which is not even involved in the transaction. For example- in the case of pollution , the negative effect of the pollution are borne by the people who have not even created it. Therefore, a pollution tax is important to reduce the pollution in the society.