Reference no: EM133516347

Assignment:

TOPIC 1

Negative externalities occur when the product and/or consumption of a good or service exerts a negative effect on a third party independent of the transaction. An ordinary transaction involves two parties, i.e., a consumer and the producer, who are referred to as the first and second parties in the transaction. Any other party that is not related to the transaction is referred to as a third party. Negative externalities commonly affect public resources where it is difficult to hold parties accountable such as in a case of environmental pollution. Producers or consumers may influence a negative externality without worrying about lawsuits or fines. For example, oceans are a public utility, and nobody holds private rights over them. Without regulations, ships and boats can pollute the sea which affects other ocean users, such as fishermen who depend on clean and productive ocean water for their livelihood. (Source: Corporate Finance Institute)

• Identify a specific negative externality that you interact with regularly, other than air or water pollution.
• Suggest two or more ways (discussed in the chapter) to reduce or modify the negative externalities.
• If you were governor, a legislator or agency policy maker, what would you proposed to reduce the negative externality that you identified. WHY?

TOPIC 2

A public good has two key characteristics: it is non-excludable and non-rivalrous. These characteristics make it difficult for market producers to sell the good to individual consumers. Non-excludable means that it is costly or impossible for one user to exclude others from using a good. Non-rivalrous means that when one person uses a good, it does not prevent others from using it. (Use the text book discussion of public goods for the framework of a public good.

• What is a specific public good that you are very familiar with. Identify how the "public good" is both non-excludable and non-rivalrous?
• What costs (types; in general terms) are incurred in providing your example of a public good? And how would you describe the benefits of your example of a public good?
• Imagine and describe another way that "your example" could be provided if it was privately provided. You may refer to another similar public good provided privately to describe another way to provide the public good/benefit.