Solution Found!
Consider two ways to protect your car from theft. The Club (a steering wheel lock) makes
Chapter 10, Problem Problems and Applications 10.1(choose chapter or problem)
Consider two ways to protect your car from theft. The Club (a steering wheel lock) makes it difficult for a car thief to take your car. Lojack (a tracking system) makes it easier for the police to catch the car thief who has stolen it. Which of these types of protection conveys a negative externality on other car owners? Which conveys a positive externality? Do you think there are any policy implications of your analysis?
Questions & Answers
QUESTION:
Consider two ways to protect your car from theft. The Club (a steering wheel lock) makes it difficult for a car thief to take your car. Lojack (a tracking system) makes it easier for the police to catch the car thief who has stolen it. Which of these types of protection conveys a negative externality on other car owners? Which conveys a positive externality? Do you think there are any policy implications of your analysis?
ANSWER:Step 1 of 4
An externality can be of two types positive as well as negative. When the spillover effect is positive, then it is known as a positive externality. When the spillover effect is negative, then it is known as a negative externality.