Negative Externalities

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INTRODUCTION

The aim of this assignment is to provide an introduction to the concept of externalities as used by economists, which are more specifically negative externalities. Then presents how externalities cause divergence between marginal social costs (benefits) and marginal private costs (benefits), and draws attention to an article: Sark protest against extension of SEM vineyard project. The residents of Sark assembled to against the Sark Estate Management to plant vines, also protesters were worried about the biodiversity of the fields. Meanwhile, Sark's Agriculture and Environment Committee allege varieties of agricultural chemical could pollute the supply water as more vines planted. Yet the director of SEM Kevin Delaney asserted, he said the planting project would advance the natural habitat and produce more jobs. Apparently, this is an argument between company with their interest and ordinary people who expect an ideal environment which cause classical problem of negative externality. Furthermore, a comparison between the literatures and the articles will show the negative externality more specifically. Subsequently, revise concisely crucial theoretical contributions in the element of negative externalities and policy selections to deal with them. Finally discuss briefly methods of internalizing externalities and how can government balance.

REVIEW OF LITERATURE

Externalities
An externality is a cost or a benefit which arises when certain actions of producers or consumers have unintended external effects on other producers or consumers. It is divided into two sides which is positive and negative. Positive externality arises when an external benefit is created by an individual or a production. For example, increasing individual education can issue in more extensive benefits for society and people in the shape of high income, high quality of citizens, greater economic productivity, lower unemployment rate, greater household mobility and...
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