The type of market failure being discussed in this article is negative externalities. Market failure occurs in this scenario according to the Jamaica’s Gleaner, because of the fact that the economic ‘rent’ associated with the natural environment is not captured by the people of Jamaica. ‘Economic rent’ is an excess return on an asset, a profit above normal market rates of return. Rents usually arise from assets that are scarce and fixed in supply. Beachfront property is a very good example of the type of assets that will yield economic rent. Another example of market failure is that these tourism entities that are currently gaining all of the rents are also not accounting for the negative externalities of their activities. For example, hotels in Jamaica do not pay for the true costs of pollution and negative impacts associated with the use and operation of their facilities (Jamaica Gleaner. Economic, social impact of tourism. January 4, 2009).

The government can implement a tourist tax policy through the existing systems in which they collect arrival taxes from cruises, vacation stays and stopovers so that they can accrue some of the economic rent. They can then use this to maintain Jamaica's tourism sector.

How will the imposition of the government tourist tax policy impact consumer surplus, producer surplus and total surplus in this scenario?

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The implementation of tourist tax policies like a collec... View the full answer