Qualification > Revison Notes
Economic Notes for Government Policies(Price fixation and stuff)
***exam***:
hey hey hey
does any 1 have ECONOMICS standard data booklet !!! ???
***exam***:
here 4 bs
pastyear:
If the firm also pollutes the atmosphere when it makes steel, however, and if it is not forced to pay for the use of this resource, then this cost will be borne not by the firm but by society. Hence, the market price for steel will fail to incorporate the full opportunity cost to society of producing.In this case, the market equilibrium in the steel industry will not be optimal. More steel will be produced than would occur were the firm to have to pay for all of its costs of production.
In the above statement, i have few doubts.
1) Why "market price for steel will fail "?
2) What do you mean by "incorporate the full opportunity cost to society of producing"?
3) Since price drop as you said why the firm will want to produce more?
Thanks and pls explain.
Freaked12:
--- Quote from: pastyear on June 01, 2010, 11:01:25 am ---Is this in the syllabus?
How about if i explain the positive and negative externalities with diagram in this question.
--- End quote ---
Market price will fail not for the firm but because of the society as firm's market price does not include externalities.
2)Same as above market price should be that price which takes Positive externalities and negative externalities into account.
3)Read again it means that the production of the firm will be much lower if it were to take externalities into account
pastyear:
Is the market price is the price charge to the consumers?
If positive and negative externalities included , market price should be high but firm's price will relatively low as firm isnt consider +ve and -ve externalities. Is this right?
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