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Concept
Negative Externalities
Negative externalities
occur when the
production or consumption
of a good or service imposes a
cost on third parties
who are not involved in the transaction, leading to a
market failure
where the
social cost
exceeds the
private cost
. Addressing
Negative externalities
often requires
government intervention
, such as
taxes or regulations
, to align
private incentives
with
social welfare
.
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