Efficiency is considered to be the system's ability to utilize inputs. The inputs are used in a way that maximum output is realized. When market failures are available in any economic system, then it means that the system input is not been utilized rightfully. The case leads to inefficiency.
No. Efficiency cannot be realized when externalities occur. The market system structures have a contribution to market failure. In any economic system, there is no market possibility to have efficiency due to inefficient producers and different externalities. When an externality leads to more social costs than the population's social benefits, then inefficiency is the resulting outcome.
Delegate your assignment to our experts and they will do the rest.
Externalities can be internalized. The government makes use of market-priced transactions that help incorporate both the costs and the benefits associated with transactions among the various economic agents (Verhoef, 2002). The government can impose taxes on the externality producers. The case is done such that no tax is imposed until when the externality reaches a particular point that makes the government impose high taxes. Hence, Pareto optimality is realized. Pollution emission fails to have externality internalization since various firms ignore the population and too much pollution occurs. For instance, since rivers are not owned by the population who enjoy using them, then they are unable to charge such pollution firms' marginal damage.
The median voter can determine the public good at its optimum as well as the political process. Therefore, the median voter believes that the voter has the best effective output and quantity. The political equilibrium is determined by all the political outcome voting process. Thus, the majority rule is the same as the agreed permission and political equilibrium. Thus, the greater the political outcome dissatisfaction, then the greater the median voter's preferred quantity under the simple majority rule.
The condition includes the tax shares under the median voter's preferred public goods' quantity (Corcoran & Evans, 2010). The tax share is a point where the median voter consumes their preferred quantity. Notably, the tax share of every voter is similar to the government's expenditure when political externalities have no value (are zero). Therefore, under the simple majority rule, the median voter does the consumption of preferred public goods' quantity.
References
Corcoran, S., & Evans, W. N. (2010). Income inequality, the median voter, and the support for public education (No. w16097). National Bureau of Economic Research.
Verhoef, E. T. (2002). 13 Externalities. Handbook of environmental and resource economics, 197.
