Question
Suppose that producing a bicycle generates no environmental degradation, while buying and riding a bicycle (consumption) help reduce greenhouse gas emissions. In contrast, producing, buying
Suppose that producing a bicycle generates no environmental degradation, while buying and riding a bicycle (consumption) help reduce greenhouse gas emissions. In contrast, producing, buying and driving a car do generate greenhouse gas emissions. Based on this information,for each economic activity, first discuss whether there is externality and what type of externality it is and explain why(e.g., production/consumption of cars/bicycles leads to positive/negative/no production/consumption externality because ... ... ...).When explaining your reasoning, make sure you relate your specific answer to the definition of externalities. Then, for each economic activity given above(e.g., production/consumption of cars/bicycles),compare private costs and benefits with the true cost and benefit to society.(5 Marks)
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