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Economic theory of externalities

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Reference no: EM133202864

The city of Chicago notices that violent behavior tends to spike in Wrigleyville after Cubs games. To be correct for this, the city cuts taxes on Cubs' tickets with the hope that it will placate violent tendencies within fans, who the city believes will get all of the benefits of the tax cut. 

1. Is the city responding to the spike in violence in the correct way based on the economic theory of externalities? 

2. Is the city correct in its thinking that all of the benefits of the tax cut will be absorbed by the fans? 

Please be brief.

Reference no: EM133202864

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