Question:
Sometimes market activities (production, buying and selling) have unintended positive or negative effects outside the markets scope. This is called an Externality. Suppose that you are a policy maker concerned with correcting the effects of gases and particulates emitted by and local power plant. What tools would you use? What would be the benefits of the action? What would be the costs? How would you decide what was the best level of emission reduction? Why do you think your approach would be better than others?