Economist A

question 181

Essay

Economist A.C.Pigou argued that to deal with a negative externality in production, the government should impose a tax equal to the cost of the externality.What did Pigou believe should be done in the case of a positive externality in consumption? How would his recommendation impact the demand and market equilibrium for the product which is generating the positive externality?

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Definitions:

Factors

Variables that are manipulated or controlled in an experiment to determine their effect on an outcome.

Two Independent

Refers to having two variables in an experiment that are manipulated or changed independently of each other.

Factorial ANOVA

A statistical test used to evaluate the effects of two or more independent variables on a single dependent variable, allowing for the examination of interactions between factors.

Independent Variable

A variable that is manipulated to observe its effect on a dependent variable in an experiment.