Unit 4 IP
Within the following presentation this assignment is going to cover some of the following concerns upon how to correct some of the effects that certain gases and elements that are emitted upon our local power plants. Also, the discussion upon how certain market activities have not attended the positive or negative effects from the outside of a market’s scope. The name for these types of effects is called “externalities”. This will determine and examine the benefits and the cost of each of the actions.
First let’s get an idea of what the true meaning of externality is. “It is a consequence of an economic activity that is experienced by unrelated third parties. An externality can be either positive or negative” (Investopedia, 2014). When an individual some how imposes certain costs on or even provide benefits for another, that is how externalities are generated. Externalities will not usually have an economic incentive in order to retrieve the benefits or costs into an account. In result this usually ends up in a positive or a negative externality. An example of a positive externality is usually a side effect that will generate a benefit for others. And a negative externality is usually generated when there is a certain side effect can impose a cost upon another (Krugman, 2011).
The government has an abundance of ways to be able to control the amounts of pollutants and emissions that can be released in the air. One of the ways is that they tax companies the companies that are causing or producing the pollutants in the air. Pigouvian Tax is what this type of tax is called. The Pigouvian Tax is used when there are external activities involved. This type of externality is an action that is not taken in account upon the acting parties. An example of this type of tax would be that the external...