Question

Fires create external costs because they spread from one building to another. if the government wants to reduce the external costs of fires, should it encourage subsidies for sprinkler systems or should they just mandate that everyone have sprinklers?

Answer 1

Fires create external costs because they spread from one building to another. If the government wants to reduce the external costs of fires, should it encourage subsidies for sprinkler systems.

Adding sprinkler systems can reduce the amount of fires that happen and spread because as soon as the fire starts, the sprinklers can put it out. Though these are costly, which they range in price depending on the system type and amount they are able to weigh the pros and cons of the system.