Qualification > Commerce

Economics help?

<< < (2/2)

someone:
isnt market failure is due to social cost > social benefits?

J.Darren:

--- Quote from: someone on June 08, 2010, 01:47:06 pm ---isnt market failure is due to social cost > social benefits?

--- End quote ---
Yes. But since Private cost + External costs = Social cost, if something is said to have an external cost, then it automatically has a negative externality (i.e. market failure).

someone:

--- Quote from: J.Darren on June 08, 2010, 01:51:14 pm ---Yes. But since Private cost + External costs = Social cost, if something is said to have an external cost, then it automatically has a negative externality (i.e. market failure).

--- End quote ---

but if the social benefits (private + external benefits) is still bigger than the social cost(which may also have external cost), the project is still NOT a market failure

J.Darren:

--- Quote from: someone on June 08, 2010, 02:02:33 pm ---but if the social benefits (private + external benefits) is still bigger than the social cost(which may also have external cost), the project is still NOT a market failure

--- End quote ---
It is a matter of proportionality I guess, virtually every act of the private producers is deemed to incur externalities, for it be positive or negative. In the IGCSE syllabus they will be giving some blatant examples and expect you to be able to identify whether a certain "project" shall be classified as a market failure that must be regulated and sanctioned by taxation, or whether it is worthwhile for the government to support it by means of subsidising it or nationalise it as a whole.

Navigation

[0] Message Index

[*] Previous page