Paraphrase this please!! Posit

Paraphrase this please!!

Positive externalities lead to underproduction. Jon does notcompensate Bob for the benefit of having pollinating bees nearby,so Bob produces less honey than is socially optimal. The tax onBob’s production makes this distortion even worse by reducingproduction even further. Because the cost of deadweight lossincrease at an increasing rate, this additional distortion isgreater than if there had been no preexisting externality. Infigure below, a tax on producer shifts supply from S1 toS2 in both cases. However, the same tax generates largerdeadweight loss when positive externality distorts themarket.  

A tax imposed on production that generates a negativeexternality corrects some of the inefficiency associated with theexternality: not only is the deadweight loss not increased by thetax, but the tax offsets some of the preexisting inefficiency.Because Bob is not bearing the full cost of his production in theabsence of the tax, he is overproducing honey. The tax will causehim to reduce production, so some of the negative externality willbe corrected. In figure below, when negative productionexternalities exists, initial production takes place atQ0 while socially efficient production isQ1.   Overproduction generates deadweight lossof DEF. A tax decreases supply to SMC (supply that representssocial marginal costs) and eliminates the deadweight loss trianglethat existed before the tax. The same tax in markets with nonegative externalities creates deadweight loss of ABC.


Positive externalities prompt underproduction. Jon does notremunerate Bounce for the advantage of having pollinating honeybees close-by, so Sway creates less nectar than is socially ideal.The duty on Weave’s creation aggravates this bending even bylessening generation considerably further. Since the cost ofdeadweight misfortune increment at an expanding rate, this extracontortion is more noteworthy than if there had been no previousexternality. In figure underneath, an assessment on maker shiftssupply from S1 to S2 in the two cases. Be that as it may, a similarassessment creates bigger deadweight misfortune when positiveexternality twists the market.

An assessment forced on creation that produces a negativeexternality rectifies a portion of the wastefulness related withthe externality: not exclusively is the deadweight misfortune notexpanded by the expense, but rather the duty balances a portion ofthe prior wastefulness. Since Weave isn’t bearing the full cost ofhis creation without the expense, he is overproducing nectar. Theexpense will make him diminish creation, so a portion of thenegative externality will be redressed. In figure beneath, whennegative creation externalities exists, starting generation happensat Q0 while socially effective generation is Q1. Overproductioncreates deadweight loss of DEF. An assessment diminishes supply toSMC (supply that speaks to social negligible expenses) and disposesof the deadweight misfortune triangle that existed before the duty.A similar expense in business sectors with no negativeexternalities makes deadweight loss of ABC.

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