This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Explain the argument for why taxing externalities is an economically legitimate distortion. What ... (Read 33 times)

robinn137

  • Hero Member
  • *****
  • Posts: 544
on: Jun 29, 2018
Explain the argument for why taxing externalities is an economically legitimate distortion.
 
  What will be an ideal response?

Question 2

What does it mean to say that a good generates network externalities?
 
  What will be an ideal response?


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

firehawk60

  • Sr. Member
  • ****
  • Posts: 315
Reply #1 on: Jun 29, 2018
Answer to Question 1

The purpose of a tax on externalities is to force decision makers to consider real costs that they otherwise would ignore. In the case of pollution, for example, the distortion caused by a tax is desirable. Instead of causing an excess burden, it results in an efficiency gain.

Answer to Question 2

For a good with network externalities, the value of the good to any particular consumer increases as more customers begin to use it. For example, the value to you of being on Facebook is higher the more people who use Facebook. Therefore by acquiring a large customer base, a particular firm may acquire market power.


robinn137

  • Member
  • Posts: 544
Reply 2 on: Jun 29, 2018
Excellent

Jossy

  • Member
  • Posts: 336
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

« previous next »
 

Did you know?

About 3.2 billion people, nearly half the world population, are at risk for malaria. In 2015, there are about 214 million malaria cases and an estimated 438,000 malaria deaths.

Did you know?

Giardia is one of the most common intestinal parasites worldwide, and infects up to 20% of the world population, mostly in poorer countries with inadequate sanitation. Infections are most common in children, though chronic Giardia is more common in adults.

Did you know?

HIV testing reach is still limited. An estimated 40% of people with HIV (more than 14 million) remain undiagnosed and do not know their infection status.

Did you know?

The average person is easily confused by the terms pharmaceutics and pharmacology, thinking they are one and the same. Whereas pharmaceutics is the science of preparing and dispensing drugs (otherwise known as the science of pharmacy), pharmacology is the study of medications.

Did you know?

Approximately one in four people diagnosed with diabetes will develop foot problems. Of these, about one-third will require lower extremity amputation.

E9-23 Prepare income statements Explain the difference in operating income E9-23 Prepare income statements Explain the difference in operating income
Please fully explain the answer with steps Please fully explain the answer with steps
Prove the argument using two column proof numbers 2 and 5 only. Prove the argument using two column proof numbers 2 and 5 only.
Prove the argument using two column proof number 5 only Prove the argument using two column proof number 5 only
Induction of a thymine dimer by UV radiation, leading to distortion of the DNA Induction of a thymine dimer by UV radiation, leading to distortion of the DNA
What single payment one year from now would be economically equivalent to payments of $1,000 ... What single payment one year from now would be economically equivalent to payments of $1,000 ...
Video: Spermatogenesis Animation

For a complete list of videos, visit our video library