The long distance transport of food has come in for huge criticism from environmentalists who argue that the price paid by consumers does not fully reflect the social cost of production. They argue that transporting food over long distance creates negative externalities in the form of pollution. Whenever production creates negative externalities the marginal social cost of production is greater than the marginal private cost. In a free market economy firms will produce up to the point where the marginal private cost of production (MPC) is equal to the demand curve (Q1). In the absence of externalities this would represent an efficient allocation of resources as price would equal marginal cost.
However because externalities exist output Q1 represents an inefficient allocation of resources since price does not equal the full marginal social cost. When externalities exist the socially optimal allocation of resources occurs at Q2 where price equals marginal social cost.
marlinbito answered the question on July 6, 2018 at 08:44
-
Explain how an economist could assess the efficiency of a market.
(Solved)
Explain how an economist could assess the efficiency of a market.
Date posted:
July 5, 2018
.
Answers (1)
-
Evaluate the desirability of a total ban on price discrimination.
(Solved)
Evaluate the desirability of a total ban on price discrimination.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain why firms engage in price discrimination.
(Solved)
Explain why firms engage in price discrimination.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain why the cost of supplying a litre of tap water is likely to be lower than the cost of supplying a litre of bottled...
(Solved)
Explain why the cost of supplying a litre of tap water is likely to be lower than the cost of supplying a litre of bottled water
Date posted:
July 5, 2018
.
Answers (1)
-
Critically examine the impact of increasing competition in the markets for electricity and gas.
(Solved)
Critically examine the impact of increasing competition in the markets for electricity and gas.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain the difference between natural and artificial barriers to entry.
(Solved)
Explain the difference between natural and artificial barriers to entry.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain the difference between unemployment and economic inactivity.
(Solved)
Explain the difference between unemployment and economic inactivity.
Date posted:
July 5, 2018
.
Answers (1)
-
Evaluate the view that GDP statistics should not be used as an indicator of economic welfare
(Solved)
Evaluate the view that GDP statistics should not be used as an indicator of economic welfare
Date posted:
July 5, 2018
.
Answers (1)
-
Explain the main factors which determine an economy’s rate of economic growth
(Solved)
Explain the main factors which determine an economy’s rate of economic growth
Date posted:
July 5, 2018
.
Answers (1)
-
Critically examine the view that fiscal policy is the most effective means of controlling aggregate demand.
(Solved)
Critically examine the view that fiscal policy is the most effective means of controlling aggregate demand.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain what is meant by price elasticity of supply
(Solved)
Explain what is meant by price elasticity of supply
Date posted:
July 5, 2018
.
Answers (1)
-
Critically examine the view that government intervention to correct market failure is likely to make matters worse.
(Solved)
Critically examine the view that government intervention to correct market failure is likely to make matters worse.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain why the free market would fail to provide sufficient public goods.
(Solved)
Explain why the free market would fail to provide sufficient public goods.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain what is meant by the term market failure.
(Solved)
Explain what is meant by the term market failure.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain some of the factors which could cause a rightward shift in a country’s production possibility curve.
(Solved)
Explain some of the factors which could cause a rightward shift in a country’s production possibility curve.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain what is shown by a production possibility curve (frontier).
(Solved)
Explain what is shown by a production possibility curve (frontier).
Date posted:
July 5, 2018
.
Answers (1)
-
Evaluate the view that current account deficits are still economically significant.
(Solved)
Evaluate the view that current account deficits are still economically significant.
Date posted:
July 5, 2018
.
Answers (1)
-
Critically examine the view that free trade alone is insufficient to promote economic development.
(Solved)
Critically examine the view that free trade alone is insufficient to promote economic development.
Date posted:
July 5, 2018
.
Answers (1)
-
Critically examine the view that government “green” policies benefit neither businesses nor the environment.
(Solved)
Critically examine the view that government “green” policies benefit neither businesses nor the environment.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain some of the ways in which businesses may use and misuse the environment.
(Solved)
Explain some of the ways in which businesses may use and misuse the environment.
Date posted:
July 5, 2018
.
Answers (1)