Positive and Negative Externalities of oBike System and Impact of Tariff Imposition on China and USA

Running head: BUSINESS ECONIMICS
Business economics
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1BUSINESS ECONIMICS
Table of Contents
Answer 1:...................................................................................................................................2
1.1:..........................................................................................................................................2
1.2...........................................................................................................................................3
1.3...........................................................................................................................................4
1.4...........................................................................................................................................6
Answer 2:...................................................................................................................................8
1.2.........................................................................................................................................10
1.3.........................................................................................................................................11
References:...............................................................................................................................12

2BUSINESS ECONIMICS
Answer 1:
1.1:
The oBike stationless system of bike sharing intends to provide the society a pollution
free ride at any time through tracking them with the help of GPS (Global Positioning
System). Through this system, company expects that the society as well as economy will
gain positive externalities (Iossa and Martimort 2015). Through this form of externality, a
benefit is created that a third-party enjoys due to an economic transaction. This third party
means any organisation, individual or property owner that can affected directly or indirectly
with this process. In this situation, marginal social benefit remains high than the marginal
private benefits. In this context, the government encourages producers to produce those
products by large number from where positive externality can be generated (Möhlmeier,
Rusinowska and Tanimura 2016). For this, the government also implies suitable policies or
provides subsidy to producers for encouraging them for more production.
Figure 1: Positive externality
Source: (as created by author)

3BUSINESS ECONIMICS
The company provides opportunity to passerby or any needy person to travel from one place
to other with the help of oBike if they do not possess any bike themselves. They can find
these bike anywhere of the city with the help of GPS and leave it anywhere as well. Hence,
this system intends that customers will not experience any difficulties to go in a near-by
station for hiring bike or leaving this in a particular area. Moreover, excessive use of these
bikes without purchasing one can reduce the tendency of car use and this further can help to
reduce the level of air pollution. This bike also provides physical fitness and consequently
this can provide positive externalities from various aspects.
1.2
The oBike intends to create positive externalities though it creates negative
externalities for society and economy as a whole. In a negative externality system, the third
party suffer a lot and pay cost for the economic transaction (Wood and Sullivan 2015). This
type of externalities occurs generally in case of property rights on resources or assets. In this
situation, production cost for the negative externality generated companies increase, as
marginal social cost (MSC) becomes higher than marginal private cost (MPC). As a result,
the society bears higher price than it actually pays.