• Research Paper on:
    Government Intervention's Role and Externalities

    Number of Pages: 5

     

    Summary of the research paper:

    In five pages externalities are defined and explained in a consideration of how they may create market failure or inefficacies with the government's intervention role also discussed. Seven sources are listed in the bibliography.

    Name of Research Paper File: TS14_TEextern.rtf

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    Unformatted Sample Text from the Research Paper:
    intervention is seen will vary, but a time of market failure is more likely to see intervention than market buoyancy. Market failure may occur due to a variety of reasons,  these are usually classified as public goods, market power equity considerations and externalities. Externalities are arguable one of the least understood factors however, to understand how a government may seek  to intervene where this is a source of market failure, the cause has to be perceived to effect a suitable response. There have been many attempts at defining what is  meant by an externality. This is seen when there is a divergence between the private and the social cost. This means that there is a divergence of the cost that  borne by the parties to the contract and the cost that is borne by society; those not party to the contract. Pigou in his 1932 work The Economics of Welfare  gave a rather clumsy explanation, but it is still valuable with an externality described as "one person A, in the course of rendering some service, for which payment is made,  to a second person B, incidentally also renders services or disservices to other persons (not producers of like services), of a sort that payment cannot be extracted from the benefited  parties or compensation enforced on behalf of the injured parties" (Pigou and Aslanbeigui, 2001). A clearer definition my be seen as "an externality is present whenever the well-being of a  consumer or the production possibilities of a firm are directly affected by the action of another agent in the economy. (Hindriks , 2001). This means that externalities may be seen  as effects of the production of goods, or their consumption on third parties and which realise uncompensated (Pigou and Aslanbeigui, 2001). In simple terms is id the effect on actions 

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