今天给大家带来一片经济学的exam代考、论文代写范文——The Externalities Involved With Market Failure
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When market fails,the market will fall into position of inefficiency.It may cause unfair distribution of income and property to the public.Many firms increase the quantity of goods supplied in order to earn more profit.It may cause the pollution in the environment as the firms are not willing to protect the environment whenever they produce goods.Besides that,unemployment will occur because of the exclusion of labor by the machines when the firms are able to improve the productivity.There will be also an undersupply of public goods.The private sectors are not willing to produce public goods as the consumers do not need to pay for these goods so that they will not earn profit from providing the public goods.
To address these public issues,the government will execute some policies to solve the market failure such as imposing taxes on negative externalities.
In the diagram above,the marginal social cost(MSC)of production will exceed to the marginal private cost(MPC).The government imposed the taxes to the sellers and the imposition of taxes will increase the production cost of the sellers.Then,the supply curve(PMC)will shift to the left.The quantity of production will decrease from Qp to Qs where the optimum output is and the social welfare will be maximized.
New Mexico Legislature is supposed to increase the state cigarette tax from 75 cents to$1.66 per pack this year.The purpose of imposing the tax is to reduce the tobacca use and save lives.The increasing of tax will discourage people from smoking.Increasing the cigarette tax is one of the most effective ways to reduce smoking,especially among kids.
From the diagram above,the production of tobacca of marginal social cost(MSC)is exceed to the marginal private cost(MPC)and the output of tobacca of the sellers is at Qp.New Mexico Legislature imposed the cigarette tax to the output of tobacca of sellers.So that,the supply curve(S=PMC)of tobacca will shift to right.The output of tobacca will decrease from Qp to Qs as the tobacca tax will increase the cost of production of tobacca.As a result,the supply curve of tobacca will move to left and equals to marginal social cost(MSC).At this moment,the optimum output of tobacca is at Qs.The imposition of cigarette tax will reduce the output of tobacca and discourage people from smoking.
Taxes on negative externalities will raise the revenue for the government and reduce the pollution of environment.
The second policy that can overcome the market failure is to provide subsidy on positive externalities.The government provides subsidy to the firms to pay part of cost to them to encourage more production.
From the diagram above,the production of marginal social benefit(MSB)is exceed to the marginal private benefit(MPB).The government provided subsidy(P2-P1)to the firm to decrease their cost of production.As a result,the firm will increase the output from Qp to Qs.Then,the social welfare will be maximized.
Malaysia government plans to provide a subsidy of RM30bil to enhance primary and secondary school education nationwide which is one of the plans of Budget 2010.
From the diagram above,when our government provides a subsidy of RM30bil on education,the operating cost of school will decrease.Then,the school will have enough capital to build more facilities and provide more educational plans from Qp to Qs for the students.The students will get more benefit from studying.At this moment,the social welfare will keep increasing till the marginal social benefit(MSB)equals to marginal social cost(MSC).
The third policy is to change the property right.This will happen when the government gives the property rights to certain people such as the fishermen could be given the property rights to a river.When negative externalities occurred,the owners of property could sue a company who caused damage or pollution such as the fishermen can sue a chemical factory which polluted the river.It may charge some social costs to the chemical factory.The government pursued this policy to reduce the pollution of environment so that the negative externalities could be eliminated.
In addition,the government will also impose the laws and regulation to prohibit the unhealthy behaviour of people such as legalizing the age for smoking and banning on drunk driving.The laws and regulations must be simple and easy to understand to the public.Due to a reducing in negative externalities,the marginal social cost will decrease.So that,imposing the laws and regulations is also a policy to overcome the market failure.
For example,it is illegal in New Zealand to sell cigarettes and tobacco products to persons aged under 18.It is also illegal for a person over 18 to give a person under 18 cigarettes or tobacco products in a public place.Another example is sales of tobacco to people under the age of 18 are illegal in all Australian states and territories.The purpose of legalizing the smoking by both governments is to reduce the consumption of tobacca.It may help to decrease the negative externalities for improving efficiency of the market.
Finally,the other policy is to give the pollution permit.The government can give a pollution permit to a firm to limit his output.The more the firm produce,the more polluted the environment is.Therefore,the marginal social cost will keep increasing and market failure will occur.The government will give the pollution permit to the firm such as limiting the firm to produce only 100 units carbon dioxide per year.As a result,there is an incentive to pollute less and the negative externalities will be eliminated.
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