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Explain why negative externalities like air pollution lead to too much production of pollution-producing goods.

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019

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Related questions

When negative externalities like pollution exist, competition leads to:

a. too few goods being bought and sold.

b. a socially efficient outcome.

c. more production than would be efficient.

d. a market equilibrium price that is too high.

Externalities are costs or benefits that are caused by producing or consuming a good but that are not included in the market price for the good. They are simply the unintended side effects of market activities. Externalities can be positive or negative. One example of a positive externality might be when beekeepers provide a means of pollination for fruit growers. Air, water, and noise pollution are examples of negative externalities.

Please answer the following questions to describe an instance in which you, an acquaintance, or family member has experienced an externality. Please use economic concepts, and use references in your main contribution.

How did it affect you (or your acquaintance or family member?) Please explain.

What were the effects? Please explain.

Did you (or your acquaintance or family member) experience increased or decreased health or quality of life? Please explain.

If you choose to write about a negative externality such as pollution, what do you think is the best way to reduce pollution? Please explain.

If you choose to write about a positive externality, what is the economic problem that positive externalities create? How would you resolve that? Please explain.

The Coase Theorem suggests that, under some conditions, private bargaining will resolve negative externalities. Does this mean that pollution problems should be left for the market to solve? Why or why not? Discuss this from the perspective of efficiency, as well as equity.

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