📚 Learning Guide
Negative Externalities in Consumption
easy

Arrange the following steps in the process of addressing negative externalities in consumption from the first to the last: A) Implement taxes to correct the market inefficiency, B) Recognize that consumption imposes costs on third parties, C) Identify the deadweight loss resulting from the externality, D) Assess the difference between marginal social benefit and marginal private benefit.

Master this concept with our detailed explanation and step-by-step learning approach

Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

B → D → C → A

B

B → C → A → D

C

D → A → B → C

D

A → B → C → D

Understanding the Answer

Let's break down why this is correct

Answer

To address negative externalities in consumption, we begin by recognizing that consumption can impose costs on people who are not directly involved in the transaction, which is step B. Next, we identify the deadweight loss caused by this externality in step C, as it shows the inefficiency in the market where resources are not allocated optimally. After understanding the loss, we assess the difference between the marginal social benefit and marginal private benefit in step D, which helps us see how much the externality affects society overall. Finally, we implement taxes in step A to correct this market inefficiency, encouraging consumers to take into account the full costs of their consumption. For example, if a factory pollutes the air while producing goods, the government can impose a tax on the factory to reduce its pollution and make it pay for the harm it causes to others.

Detailed Explanation

First, we need to recognize that consumption can hurt others. Other options are incorrect because This option suggests we identify the loss before understanding the costs to others; This option starts with taxes before understanding the benefits and costs.

Key Concepts

Negative externalities in consumption
Marginal social benefit vs. marginal private benefit
Government intervention
Topic

Negative Externalities in Consumption

Difficulty

easy level question

Cognitive Level

understand

Ready to Master More Topics?

Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.