What is an externality? How do positive and negative externalities differ in their effects? How can government action correct positive and negative externalities?
What will be an ideal response?
An externality is a cost or benefit of an economic activity that is borne by third parties. A good generating a positive externality is underproduced and underconsumed. A good generating a negative externality is overproduced and overconsumed. The government can correct a positive externality by either producing the good itself or by providing a subsidy equal to the external benefit, and can correct a negative externality by either imposing a tax equal to the external cost or by direct regulation.
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Modern terrorism overturns the central assumption of the Westphalian system that says only
a. democracies can provide a lasting form of power. b. weapons of mass destruction actually maintain peace. c. states have the military force to create serious security threats. d. economic inequality pits private citizens against one another.
Suppose that Far North Canadian Lumber, Ltd., sells lumber in Canada at a price of $1,000 per 1,000 board feet and exports the same lumber to the United States at a price of $600 per 1,000 board feet. U.S. Lumber, Inc., produces and sells lumber for $700 per 1,000 board feet in the United States. What other condition must be satisfied in order for the U.S. government to impose an antidumping duty on Canadian lumber imports?
a. There must be material injury to a Canadian lumber producer. b. There must be material injury to a U.S. lumber producer. c. There must be material injury to both a U.S. and a Canadian lumber producer. d. All these conditions must be satisfied.