Running head: ECONOMIC EFFICIENCY, MARKET FAILURE, BENEFIT-COST

ANALYSIS 1

Economic Efficiency, Market Failure, Benefit-Cost Analysis

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Economic Efficiency, Market Failure, Benefit-Cost Analysis

Introduction

In the contemporary world, there are limited resources to meet the needs of the increasing

population. Therefore, economic efficiency concept is needed to protect these resources from

excessive waste. There is a need for companies to conduct cost-benefit of their activities to

ensure their activities do not pollute the environment.

Summary

Economic efficiency takes place where goods and factors of production in an economy

are allocated to the most valuable uses, and waste is minimized. If all the societies could adopt

economic efficiency in the management of their resources, then having cases of environmental

pollution would not be heard of in the contemporary world. However, due to market failures to

protect limited resources, there are many cases of massive environmental destruction across the

world. Since people have failed to correct some of the market failures to ensure the surrounding

environment is protected, they are forced to pay the price of their activities.

Before establishing a project in any given place, there is a need to conduct a feasibility

study to understand the environmental impact of the project. The change in climate reported

across the world is mainly due to market failures. The governments, world leaders, corporate

leaders, and society as a whole have failed to protect biodiversity, and the result is what is

observed in different parts of the world. Therefore, as much as people are interested in

developing major development projects such as big construction sites, there is a need to conduct

a cost-benefit analysis of the project. The concept of cost-benefit analysis, in this case, includes

the potential environmental impact of the project.

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Global warming presents a major challenge to both plants and animals, and the world is

going through major climate changes. Although there are many efforts put in place to protect the

surrounding environment, they have failed to eradicate environmental pollution. There are many

poisonous gases release on the atmosphere as companies compete to maximize profits. Many

companies think that the responsibility to protect the surrounding environment is with the

government and not themselves. Unfortunately, the activities of these companies cause a lot of

environmental effects which they cause to the world. If the concept of cost-benefit analysis is

applied, then the environmental impact which these industries outweigh the benefits, and they

must come up with various ways to minimize costs associated with environmental pollution and

maximize conservation of the surrounding environment.

There is an intense campaign across the world to create awareness on the need to protect

the environment. Failure to protect the environment takes place when people fail to use the

limited resources they have efficiently, which in this case relates to the concept of economic

efficiency. The principle of economic efficiency demands that human beings must use the little

resources they have to derive maximum satisfaction.

Conclusion

There are limited resources in the world to satisfy human beings' unlimited resources. As

a result, human beings must effectively use limited resources efficiently, eliminating waste,

which is popular in the world. Failure to protect the surrounding environment is the same as

market failure, and as a result, human beings are forced to pay the cost of failing to protect the

surrounding environment. In order to save the world from adverse environmental impact, the

world must take various initiatives to use the available resources effectively and efficiently to

eliminate wastage, which is associated with market failures.