Question: a) Is pollution generated by some industries an External Cost or External Benefit, ceteris paribus? Should the Government try and increase (or decrease?) the demand

a) Is pollution generated by some industries an External Cost or External Benefit, ceteris paribus? Should the Government try and increase (or decrease?) the demand (or supply?) of goods/services in these industries. Explain why.

3 marks

b) Explain if action taken by the Government to manage pollution will shift the demand (or supply?) curve and how this affects resources allocated (used by) these industry. (Drawing and using your own demand/supply model may be helpful).

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