NO AI USAGE WHATSOEVER
CREATE A RESPONSE IN 200-250 WORDS
Negative and Positive Externalities
In the chapter on externalities you are introduced to market failures, where the socially optimal output is not the same as what the market produces by itself. For this assignment, your task is to:
- Describe a real-world negative or positive externality.
- In your externality identify who are the participants in the market and who receives the spillover?
- How are the incentives for the firm misaligned from the rest of society to make the externality?