Mr Makhani has just retired and received R1000 000 net lump sum income from his employer. He decided to spend it all on a tree farm, he planted pine trees for plumbing materials. Environmental Economists argue that planting trees produces market failure as the market fails to consider positive production spillover effects generated by CO2 capturing effect of tree plantations. With the aid of suitable diagrams, illustrate and discuss the positive external effect of Mr. Makhani’s business and indicate the necessary intervention by Government aimed at internalizing the effect of such spillovers.

Mr Makisha has just retired and received R1000 000 net lump sum income
from his employer. He decided to spend it all on a tree farm, he
planted pine trees for plumbing materials. Environmental Economists
argue that planting trees produces market failure as the market fails
to consider positive production spillover effects generated by CO2
capturing effect of tree plantations. With the aid of suitable
diagrams, illustrate and discuss the positive external effect of Mr.
Makisha’s business and indicate the necessary intervention by
Government aimed at internalizing the effect of such spillovers.