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The vaccine is imported from a competitive foreign market where it sells for $10/dose. Production of the vaccine produces water pollution (an external cost) that does an average of $2 worth of damage per dose of vaccine produced. The pollution only affects people that live close to the production plant. The cost of shipping the vaccine is $1 per dose. The vaccine is imported by a domestic firm that has the sole rights to import the vaccine. This firm buys the vaccine at cost and sells it for $15 per dose.

When the product is produced in foreign country, and lead negative external cost to the foreigners, should we consider the external cost a cost or transfer if the affect people in foreign country have standing?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M942727

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