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Essay / Research Paper Abstract
A 4 page paper defining externalities and how they lead to market failure, then discussing three approaches (regulation, cost-benefit analysis, adopting sustainability measures) to correcting negative externalities. Negative externalities are "spill-over" qualities or items that carry social costs. When producers fail to acknowledge those social costs, the costs are there just the same. Milliken is one company that gives potential negative externalities the attention they deserve. Bibliography lists 3 sources.
Page Count:
4 pages (~225 words per page)
File: CC6_KSpubAdmExtern.rtf
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Unformatted sample text from the term paper:
the "spill-over" effect of virtually every economic activity (What are externalities?, 2005). There are negative externalities that garner the greatest attention, there are positive externalities that provide added benefit
to specific economic activities. Negative externalities are "spill-over" qualities or items that carry social costs. When producers fail to acknowledge those social costs, the costs are there just
the same. Producers base their cost information at a point that does not consider the social costs of their actions, and it is market operation at the point that
producers choose that leads them to base their prices and costs at a point that is far more optimistic than the true costs of their production activities when social costs
are included as well. Because social costs do not merely disappear because they have not been considered, the shortfall between market mediation of supply and demand and the total,
true costs of an activity eventually creates a market failure. Externalities Origins Weimer and Vining (2005) graphically illustrate the principle of negative externalities
on page 94 of their text, Policy analysis, Concepts and Practice (Prentice-Hall). A similar graph is presented below: Source: (What are externalities?, 2005)
The producer bases his assessment of costs and prices at the level of private optimum, Q1, while the true level at which these quantities should be assessed
is at Q2, the social optimum. The producer can function quite well at the point he has chosen, at least for a time. Eventually the unacknowledged social costs
catch up to the entire process to add costs that often are more than only significant. The cleanup of Love Canal is an extreme example of such a negative
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