Consider an economy which is heavily dependent on tourism. To boost tourist revenue, the government has decided to reclaim the sea to build a theme park at the coastal area. This has resulted in sea pollution, reduces the fish stock and threaten the livelihoods of fishermen in the vicinity. (a)Describe the type of externality exist in the scenario. Explain with a suitable diagram and highlight the area of the efficiency loss. (b)Explain the remedial action to rectify the externality problem.

Consider an economy which is heavily dependent on tourism. To boost tourist revenue, the government has decided to reclaim the sea to build a theme park at the coastal area. This has resulted in sea pollution, reduces the fish stock and threaten the livelihoods of fishermen in the vicinity. (a)Describe the type of externality exist in the scenario. Explain with a suitable diagram and highlight the area of the efficiency loss. (b)Explain the remedial action to rectify the externality problem.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter31: Public Choice And Special Interet Group Politics

Section31.4: More About Voting

Problem 1ST

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