Answer
The zoning laws deal with negative externalities.
The reason is that they try and account for things such as pollution that a firm might try and push onto the consumer by ordering that certain land cannot be used in an area where the externality could be a major problem.
Tax breaks for installing fire prevention equipment in close buildings is an example of a positive externality.
The reason is that the people who live in those apartments receive the indirect benefit of not having major fire accidents in that apartment.
An excise tax on beer may cause fewer people to drink beer and become drunk because of the increased price.
Thus, there may be fewer fatal accidents that occur due to drunk driving.
Work Step by Step
The zoning laws deal with negative externalities.
The reason is that they try and account for things such as pollution that a firm might try and push onto the consumer by ordering that certain land cannot be used in an area where the externality could be a major problem.
Tax breaks for installing fire prevention equipment in close buildings is an example of a positive externality.
The reason is that the people who live in those apartments receive the indirect benefit of not having major fire accidents in that apartment.
An excise tax on beer may cause fewer people to drink beer and become drunk because of the increased price.
Thus, there may be fewer fatal accidents that occur due to drunk driving.
