--%>

How might government correct this divergence

What divergences arise between equilibrium and an efficient output spillover benefits are present?  How might government correct this divergence?

E

Expert

Verified

When spillover benefits are present, the equilibrium output will be smaller than the efficient output because the consumer is willing to pay a price equal to the consumer’s individual marginal benefit, but no more.  Since social benefits exist in addition to the private benefit, the government must either aid the producer to encourage more output or engage in its own production of the item with the spillover benefits.

   Related Questions in Business Economics

  • Q : The market system not only accepts

    Explain the statements: The market system not only accepts self-interest as a fact of human existence.

  • Q : Determine the lowest average wages

    Consider a huge group of identically smart and strong industrious workers. All else identical, Adam Smith would predict such that the lowest average wages would be earned through the workers who were in the work that: (1) had the leas

  • Q : International Trade & Globalization

    Question: 1.   Long-term Growth, International Trade & Globalization a.   In terms of understanding the importance of trade to an economy, the most impor

  • Q : Estimate the impact of education on

    Using a random sample of 670 individuals for the population of people in the workforce in 1976, we want to estimate the impact of education on wages. Let wage denote hourly wage in 1976 U.S. dollars and let educ denote years of schooling. We obtain the following OLS regression line: wage = -0.54

  • Q : Illustrate Economics for citizenship

    Illustrate Economics for citizenship?

  • Q : Change in supply and a change in the

    Distinguish between a change in supply and a change in the quantity supplied?

  • Q : Define the terms Plant Define the

    Define the following terms?

  • Q : What do you mean by the term United

    What do you mean by the term “United State in Global Economy”?

  • Q : Why Public or social goods not be

    Why Public or social goods not be produced through the market?

  • Q : Technological advances in producing

    When given resources can now produce additional goods than was previously probable, then there have been a: (1) Stock market boom. (2) Competitive spurt which shrinks entrepreneurial gain. (3) Concavity reversal in the production possibilities frontier. (4) Bigger rel