Provide an Example of a Positive Externality and Explain: 1)

question 27

Essay

Provide an example of a positive externality and explain: 1) why it should be considered a positive externality and 2) what could be done in order to internalize the externality.

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Definitions:

CCA Class

Categorization within the Capital Cost Allowance system in Canada that determines the depreciation rate for tax purposes on assets.

Tax Rate

The amount of money, in terms of a percentage, that the government collects as tax from enterprises or persons.

Cost Of Debt

The return that lenders require on the firm’s debt.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset evenly across its useful life.