QUESTION

1.Identify an infrastructure you would like to explore for this assignment.
2.Research how externalities impacted the development of your infrastructure – both positively and negatively.
3.Write a 2- to 3-page paper that includes the following sections. format your paper using the Academic Paper Guidelines. Include 1 to 2 resources besides your textbook.
5.Definition of externalities.
6.Provide an example of a positive externality associated with development of the infrastructure. Explain why.
7.Provide an example of a negative externality associated with development of the infrastructure. Explain why.
8.Discuss how the postive and negative externalities relate to the willingness to pay (WTP) analysis.

                                                         SAMPLE SOLUTION

The Effects of Externalities on the Transport Infrastructure

Externalities are factors whose costs and benefits are not reflected in the market price of commodities (goods and services). The benefits are referred to as external economies while the costs are referred to as diseconomies (Meade, 1999). Externalities can affect different aspects of production, distribution and consumption of goods and services and can either be negative or positive.  This paper will explore the influences of externalities on a transport infrastructure.

An infrastructure is defined as the basic organizational and physical structures and facilities required for the operation of an enterprise or society. Externalities, as aforementioned, have both positive and negative effects on transport infrastructure.

One way by which externalities affect transportation is congestion. Congestion can be considered as an external influence that travellers inflict on each other. This is so because a traveller takes not into consideration the effect he or she has on the travel times of other travellers (Cornes & Sandler, 1999). This can be well understood when the following factors are exhaustively examined: the computation of travel times on transport networks and the transformation of the time losses (in minutes) to financial units, by the use of a value of time. Congestion causes delays, leads to a higher rate of fuel consumption leading to greater air pollution, leads to increased cases of road rages and may force a country to come up with emergency vehicles (Gramlich, 2004). These have a direct effect on economic development. For instance, a delay in delivery of gods and services or workforce has the implication of delayed manufacturing process by an organization or a company. This leads to reduced economic growth. Additionally, with high rate of fuel consumption, there is increased rate of air pollution that leads to adverse health problems (Blum, 2002). Contrarily, with congestion, there is reduced speed for automobiles. This has the capability of reducing accidents.