Provide a qualitative 1-2 paragraph response with cited source.
In most cases, it is essential for a government to interfere in the cost externalities. This situation often arises when there is the presence of negative externalities like pollution. This issue is an element with the capability to affect businesses like tourism (Allen, Weigelt, Doherty andMansfield, XXXXXXXXXXIt is hence crucial for a government to interfere in such instances since tourism is a sector which significantly affects the economy of a particular nation. This is because the contaminator tends to only consider their own direct expenses and gains attained through their production and disregards the indirect expenses caused by their contamination of the environment. This will require the government to interferewith the making of policies that require companies to conserve the environment.
The climate change conferences held annually by the United Nations have required governments to reduce emissions in their individual nations to a certain level. This has then resulted in the governments requiring their industries to reduce their emissions which have the ability to harm the environment. This is in an effort to conserve the environment which is essential in supporting other forms of businesses like tourism.
An economist from Britain known as Arthur Pigou has recommended that governments are supposed to tax contaminators of the environment a certain amount which is proportional to their pollution (Stengel and Business Expert Press, XXXXXXXXXXThis will have an effect of suppressing contamination by organizations. He has also recommended for governments to promote the organizations which strive to conserve the environment with an intention of supporting their actions.
? Positive externalities are on the other hand supposed to be promoted by the government through issuing grants. This would, in turn, lead to reduce the expense of production for the companies involved hence facilitating their ability to reduce prices. A decrease in price usually has an effect of enticing more customers to the organizations which then increases their income. The expense of an externality could also be sufficiently high that the government declares it a public commodity. This would result to catering for all its expenses of production like immunizations of infectious illnesses such as polio. Therefore, this measure is essential in that it promotes the undertakings of the companies that benefit the society.
Therefore, the interference of governments on the undertakings of organizations is crucial in that it facilitates the ability to control and reduce undesirable externalities. These are usually cases which affect the society undesirably and hence should be reduced if not terminated. The desirable externalities are essential since they benefit a society and hence should be supported by governments. Failure of the government to interfere in these issues leads to the reduction of the desirable externalities and increase of the undesirable externalities. The majority of organizations usually disregard the indirect impacts their actions have on the society hence the need for government interference.
References
Allen, W. B., Weigelt, K., Doherty, N., & Mansfield, E XXXXXXXXXXManagerial Economics: Theory,?Applications, and Cases. ˜xxxœ: W. W. Norton & Company.
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Stengel, D. N., & Business Expert Press XXXXXXXXXXManagerial economics: Concepts and?principles. New York, N.Y.] (222 East 46th Street, New York, NY 10017: Business?Expert Press.