Negative Externalities

Negative externalities.

Explain what types of externalities are, and give examples, which could help to understand external factors more clearly.

Choose a problem which could the the negative externality and try to solve it by choosing sertain right solutions.

Applying this model to the farmer at first it could be immagined that farmer does not change his behaviour. But now the fishermen and recreationist down strain can negotiate the farmer to reduce the amount of fertilizer that he lays on the field. This reduces the amount of fish died in lake. Thinking about the opposite we could let the fishermen to asign the property rights. It may initionaly seem that it could stop him using fertilizer on a land. However now the farmer as the incentive and a knowledge to negotiate with the fishermen down the strain. The fishermen will allow some positive nano-fertilizer but not as much as he let before. In each scenario I could come to a solution that they internalazes the externality or overcomes it. The fishermen and the farmer now know the cost the externality and are enable to negotiate in order to overcome it. The benefit of this to other regulations is that the monetary costs are very small. There is an incentive way for fishermen and a farmer to find ways to reduce the negative impact and social wellfare. Comparing these three solutions, I could come to a conclusion, that the best way could be property rights solution, which not even could let both parties to negotiate, because of the problem, but also to solve the problem in their own best way. Also this regulation is the most attractive because of the moneraty costs – they are very small. Besides these three ways there are also lots of solutions which could help to shrink or even make negative externality costs disapear. Firms, companies, fabrics, people – the first party – can try to continue their actions with less damage to the enviroment. For example companies could reduce the amount of spillovers in the production or even to alter the technique in production. Changes made in production methods may include direct costs of pollution control equipment, manufactured goods set changes or other changes made in the production proccess. Also there could be given fines ar fees, which could also help to reduce negative externalities. Directly linked to the amount of pollution fines ensures that the company will reduce the pollution at the lowest cost, in the most efficient manner and also to limit the pollution control rising costs.