ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Remedies for Negative Externalities One of the solutions to negative externalities is to impose taxes to change people’s behavior. The taxes can be imposed to reduce the harmful effects of certain externalities such as air pollution, smoking, and drinking alcohol.

Detailed explanation-2: -A negative externality exists when the production or consumption of a product results in a cost to a third party. Air and noise pollution are commonly cited examples of negative externalities.

Detailed explanation-3: -A Pigovian tax is intended to tax the producer of goods or services that create adverse side effects for society. Economists argue that the costs of these negative externalities, such as environmental pollution, are borne by society rather than the producer.

Detailed explanation-4: -Defining property rights. A strict definition of property rights can limit the influence of economic activities on unrelated parties. Taxes. A government may impose taxes on goods or services that create externalities. Subsidies.