History is important in explaining why certain industry is concentrated in a certain city (eg. financial industry in New York City, entertainment industry in Los Angeles) in terms of Marshallian externality. () i. true ii. false

Q: Which of the following is an example of an externality? a. a flu shot that prevents a student from…

A: An externality can be defined as a cost or benefit that arises when goods or services are being…

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A: Option A )  It is a classic case of negative externality. Every government  tries to internalise the…

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A: Total social cost Total social cost refers to the is the total of the private costs coming from a…

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Market Failure Analysis

To understand Market failure, we need to first understand welfare economics. An Italian economist, Vilfredo Pareto stated that allocation of resources in an efficient manner such that an economic change, which harms no one and makes someone better off, indicates an increase in social welfare. It is also called Pareto Optimality, where resources cannot further be reallocated without harming one. This does not apply to those economic changes, which harm some and benefit others. social welfare increases if the utility of any of its members' increases and none decrease in the economy.