--%>

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 : Technical change and vintage technology

    In heterodox economics, what implications does technical change and vintage technology contain for the cost structure of the business enterprise?

  • Q : Inefficiencies and inequities by

    An employer that exaggerates the safety of a position or the prospects for advancement to job applicants makes inefficiencies as well as arguable inequities due to: (1) signaling. (2) credentialism. (3) screening. (4) adverse selection. (5) a moral hazard.

  • Q : Increase in the American dollar price

    “An increase in the American dollar price of the South Korean won implies that the South Korean won has depreciated in value.”  Explain.

  • Q : What problem does barter entail What

    What problem does barter entail?

  • Q : Define Average cost and Marginal cost

    Briefly explain the term Average cost and Marginal cost?

  • Q : Enterprise is dictated primarily by

    “The legal form an enterprise assumes is dictated primarily by the financial requirements of its particular line of production.”  Do you agree?

  • Q : How government might manipulate its

    Explain how government might manipulate its expenditures and tax revenues to reduce unemployment?

  • Q : Supply and demand at tax burdens and

    The new supply and demand curves within University City are S0 and D0. But after the county commission imposed at $3 per six-pack excise tax upon beer: (w) beer sellers' revenue after taxes decreases by $60,000 monthly. (x) buyers and sellers eac

  • Q : Who define Theory of Moral Sentiments

    The argument which slicing off one’s pinkie would be extra bothersome to which person than the loss of millions of his brethren was made within A Theory of Moral Sentiments (1755) through: (1) Adam Smith. (2) David Ricardo. (3) Theophrastus Phil

  • Q : Describe the term Cost of debt Briefly

    Briefly describe the term Cost of debt?