--%>

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 : Firm costs and revenues Question:  You

    Question:  You are given the following data about two firms: FIRM A Quantity 0

  • Q : Current Account captures international

    Question The Current Account captures international fund flows due to net income on (past) investments, net transfers, and i._______________________________, general

  • Q : Comparison between EVA and Ratio

    Comparison between EVA and Ratio Analysis: EVA helps in measuring the economic performance of the company. It is the profit earned by the firm less the cost of financing the firm’s capital. It shows that the shareholders gain when the return fro

  • Q : Problem on utility function Matt’s life

    Matt’s life is divided into two time periods, young and old, and his utility is a function of two “goods”:  consumption when young and consumption whenever old.  Consumption when young and consumption when old are both of normal goods to Ma

  • Q : Government Pegged Currencies Question:

    Question: If a government pegs the value of its currency to another currency, the government must stand ready to i. _________________________ the "hard" currency to defend the pegged value of its own currency. ii.

  • Q : Answer the following questions based on

    The dataset used in this question contains data on 180 economics journals for the year 2000. The variable descriptions are as follows: logoclc - log of the number of library subscription loglibcit - log of the library subscription price per citation.

  • Q : History of King Louis world of commerce

    Early in the 18th century, a leading industrialist responded to an advisor of King Louis IV of France, who asked how the crown could most excellent facilitate the world of commerce, along with “Laissez nous faire,” that im

  • Q : Describe the duty of bondholders in a

    Describe the duty of bondholders in a bond?

  • Q : Define explicit cost and implicit cost

    Briefly describe the term explicit cost and implicit cost?

  • Q : Example of self interest to define

    The concept of _____ was demonstrated by _____ along with the quotation, “The defeat of a bit finger would remain the average European from sleeping which night,... but, given he never saw them, he will snore along with the most profound security over the loss o