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How do subsidies address positive externalities?

They reduce the cost of producing or consuming merit goods, increasing their use.

What are demerit goods?

Goods that are over-consumed if left to the market, often with negative externalities, like alcohol or cigarettes.

What is the role of international agreements in managing externalities?

They coordinate global responses to sustainability challenges, e.g., the Paris Climate Accord.

What is collective self-governance in managing common resources?

When communities manage resources collectively without external regulation.

What are tradable permits?

Market-based instruments that cap total pollution and allow firms to trade emission rights.

What are public goods?

Goods that are non-rivalrous and non-excludable, like street lighting or national defense.

How do carbon taxes address market failure?

They increase the cost of emitting CO₂, discouraging pollution and internalizing the external cost.

What is the 'tragedy of the commons'?

The overuse and depletion of common resources due to individual incentives.

What are positive externalities of production?

Benefits to third parties from the production of a good, such as improved public health from vaccine production.

What are the limitations of government intervention in externalities?

Measurement difficulties, effectiveness concerns, and stakeholder conflicts.

What are negative externalities of consumption?

Costs imposed on third parties by consumption, such as secondhand smoke from cigarettes.

What are Pigouvian taxes?

Indirect taxes imposed to internalize negative externalities, aligning private and social costs.

What diagram shows market failure due to negative externalities of production?

A diagram with marginal private cost (MPC) lower than marginal social cost (MSC), showing overproduction.

How can governments intervene in the provision of public goods?

Through direct provision or contracting private firms to supply them.

Give two examples of government regulation to correct externalities.

Emissions limits for factories and bans on plastic bags.

What is the socially optimum output?

The output where marginal social benefit (MSB) equals marginal social cost (MSC), achieving allocative efficiency.

What are merit goods?

Goods that are under-consumed if left to the market, often with positive externalities, like education or healthcare.

What does MSB = MSC represent?

Allocative efficiency, where social/community surplus is maximized.

What is the free rider problem?

People can benefit from a good without paying, leading to under-provision by the market.

What is a common pool resource?

A resource that is rivalrous but non-excludable, like fisheries or forests.

Germany Brings Back EV Subsidies to Boost Electric Car Sales

Germany Brings Back EV Subsidies to Boost Electric Car Sales

Freeze the Rent: Zohran Mamdani’s Bold Bet on Price Controls — An Economist’s Dream or Nightmare?

Freeze the Rent: Zohran Mamdani’s Bold Bet on Price Controls — An Economist’s Dream or Nightmare?

Sugar Tax Shake-Up: UK Plans to Target Milkshakes and Dairy Drinks

Sugar Tax Shake-Up: UK Plans to Target Milkshakes and Dairy Drinks

U.K. Government Seizes Control of British Steel Plant

U.K. Government Seizes Control of British Steel Plant

New York Launches $9 Congestion Toll to Combat Gridlock

New York Launches $9 Congestion Toll to Combat Gridlock

Russia Slaps Google with an Unpayable Fine for Blocking State Media

Russia Slaps Google with an Unpayable Fine for Blocking State Media

Google and Apple Fined Billions for Abusing Monopoly Power

Google and Apple Fined Billions for Abusing Monopoly Power

New Starbucks CEO Faces Backlash Over Private Jet Commute

New Starbucks CEO Faces Backlash Over Private Jet Commute

UK Aiming to Snub Out Smoking For Good

UK Aiming to Snub Out Smoking For Good

Uber to Pay $271.8 Million in Landmark Australian Settlement

Uber to Pay $271.8 Million in Landmark Australian Settlement

AI’s Thirst for Power: The Environmental Cost of Artificial Intelligence

AI’s Thirst for Power: The Environmental Cost of Artificial Intelligence

Paris Triples Parking Charges for SUVs in a Push for Greener Streets

Paris Triples Parking Charges for SUVs in a Push for Greener Streets

Scotland to Increase Alcohol Minimum Price by 30% in Public Health Push

Scotland to Increase Alcohol Minimum Price by 30% in Public Health Push

UK Government to ban disposable vapes

UK Government to ban disposable vapes

New Zealand’s U-Turn on Groundbreaking Smoking Ban

New Zealand’s U-Turn on Groundbreaking Smoking Ban

Pouring Money Down the Drain: The €200M Plan to Save Wine!

Pouring Money Down the Drain: The €200M Plan to Save Wine!

Retirement Riches (for some!): Top Executives Amass Billions While Workers Struggle

Retirement Riches (for some!): Top Executives Amass Billions While Workers Struggle

Ethiopia to break Up Ethio-telecom’s Mobile Payments Monopoly

Ethiopia to break Up Ethio-telecom’s Mobile Payments Monopoly

Germany’s Controversial Proposal to Subsidise Electricity for Industry

Germany’s Controversial Proposal to Subsidise Electricity for Industry

The AI Revolution: A Double-Edged Sword for the Job Market?

The AI Revolution: A Double-Edged Sword for the Job Market?

South Africa’s Vape Tax: A Cloudy Future for the Booming Industry

South Africa’s Vape Tax: A Cloudy Future for the Booming Industry

Swap to Stop: A Bold New Plan to Snuff Out Cigarettes

Swap to Stop: A Bold New Plan to Snuff Out Cigarettes

Juul Coughs Up $462M to Settle State Cases Over Teen Vaping Epidemic

Juul Coughs Up $462M to Settle State Cases Over Teen Vaping Epidemic

Greece launches €200m solar subsidy program to boost renewable energy adoption

Greece launches €200m solar subsidy program to boost renewable energy adoption

Utah’s Social Media Laws: Will They Protect or Harm Kids?

Utah’s Social Media Laws: Will They Protect or Harm Kids?

Is the government to blame for Indonesia’s surging rice prices?

Is the government to blame for Indonesia’s surging rice prices?

UBS to the Rescue! Swiss Bank Saves Rival Credit Suisse in Multi-Billion Dollar Deal

UBS to the Rescue! Swiss Bank Saves Rival Credit Suisse in Multi-Billion Dollar Deal

A bank with over $200 billion in assets has collapsed… how?

A bank with over $200 billion in assets has collapsed… how?

Biden to propose tax hike on highest earners to fund Medicare

Biden to propose tax hike on highest earners to fund Medicare

Canadian Alcohol consumption at historic lows

Canadian Alcohol consumption at historic lows

Is the internet a merit good?

Is the internet a merit good?

Externality diagrams

Farmyard fart tax to combat climate change – a novel solution from the New Zealand government!

How effective will the UK plastic tax actually be?

How effective will the UK plastic tax actually be?

World’s major economies to release oil reserves to lower soaring oil prices

World’s major economies to release oil reserves to lower soaring oil prices

Gas price surge leaving businesses bankrupt and consumers uncertain

Gas price surge leaving businesses bankrupt and consumers uncertain

State of Ohio to award 5 people $1 million for taking the Covid-19 vaccine

State of Ohio to award 5 people $1 million for taking the Covid-19 vaccine

Fortnite-maker Epic Games is seeking to expose the monopoly power of Apple and Google

Fortnite-maker Epic Games is seeking to expose the monopoly power of Apple and Google

robots replacing workers

Is taxing robots the best way to protect human jobs?

an image of plastic bags in an overfilled bin

Paying for plastic bags has dramatically reduced usage in the UK

Tesco uses monopsony power to put pressure on suppliers

UK supermarket is flexing its monopsony muscle

Union Jack like the one to be painted on the UK Prime Ministers Plane at a cost of £900,000

£900,000 of taxpayer’s money to be spent on painting the PM’s plane

French government to provide 8 billion euros to help revive their car industry

French government to provide 8 billion euros to help revive their car industry

an image of Fiat-Chrysler and PSA ahead of their proposed $50 billion merge

The fate of the proposed merger between Fiat-Chrysler and PSA group to be decided by June 17

an image of an electric car charging as China announces more subsidies for electric cars

China to continue subsidising electric vehicles as the post Covid-19 recovery begins

Image of a coal mine

Coal: the world’s dirtiest and most damaging fossil fuel has now become the most expensive!

Apple faces a record US$1.2 billion fine for fixing prices in France

Apple faces a record US$1.2 billion fine for fixing prices in France

Crude Oil takes a 30% dive as Saudi Arabia gears up for a price war

Crude Oil takes a 30% dive as Saudi Arabia gears up for a price war

Free public transport for everyone in Luxembourg!

Free public transport for everyone in Luxembourg!

Facebook CEO to agree to paying more taxes overseas

Facebook CEO to agree to paying more taxes overseas

Study suggests that one-third of all plant and animal species could be extinct by 2070

Study suggests that one-third of all plant and animal species could be extinct by 2070

The more you honk the more you wait: Mumbai’s innovative solution to impatient honkers!

The more you honk the more you wait: Mumbai’s innovative solution to impatient honkers!

Stock prices surge for companies working on a coronavirus vaccine!

Stock prices surge for companies working on a coronavirus vaccine!

High speed trains that drive themselves? It must be 2020!

High speed trains that drive themselves? It must be 2020!

The Ashtray of Europe finally going smoke free

The Ashtray of Europe finally going smoke free

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