Answer to Question #62243 in Other Economics for Anna
a. Evaluate the statement by the economist: "Prices in the U.S. are artificially low. You're not paying the costs of pollution, and that is why China is an environmental catastrophe." (Hint: the economist has identified a type of market failure.)
Current model of human development does not take into account external effects of production – environmental pollution. On the one hand, we produce goods, and on the other hand, we have to deal with health problems caused by dirty environment. The price of environmental pollution is not included to the prices of goods. This does not stimulate sufficiently a shift to clean production technologies.
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