Social Cost Theory Summary

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The article shows information pertaining to how Great Britain used road-based charging primarily to reduce road congestion at the same time gain additional income from imposing collections on road use. Relatively, the topic provides guidelines and inputs to which emphasizes on the marginal social cost concept. According to Krugman (1991), firms can react by making endogenous changes to account the endowment, either existing or expected and of supervised production factors. In this article, Great Britain become accustomed to change to which they came up with an idea of producing additional output. It has become a desire of the government of Great Britain to reduce road congestion at the same time produce another sources of their income. Geuna …show more content…

Marginal cost as defined by Baye (2006), is the cost of producing additional unit of output that is, the change attributable to the last unit of output. Marginal cost is also called incremental cost. To at least understand something about this cost, it may provide managers a better option to grow and maximize company`s profit. Penrose (1959), states that firms are able to generate internal competence, adapt changes, defined as the capability to accumulate unused or potential services which can lead to increasing levels of efficiency that are at the same time the cause of growth and its consequence. He further states that increasing profit and efficiency is generated by means of accumulating competence based upon processes of learning by doing and learning by using, which feed growth of output with less than proportionate levels of increase of inputs. It is unlikely to be heard but failure to understand marginal cost in relation to social satisfaction causes people to spend more than his/her individual capacity and …show more content…

We already have a lot of good policies and plans but we always find difficulty in its implementation. It comes up to my mind that the problem to us is not the policy or the practices we have but WE as the doer of the action. It reminds me of the article in the internet stating that the Philippines is the most corrupt country in the world. It also reminds me of Prof. Ed De Gracia who always said that for as to understand and effectively implement a policy, look at what BIR Commissioner Henares is doing. He

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