Negative Externalities of Production

In our last lesson we defined and introduced the different types of market failures we’ll study in future lessons. The first we examine is negative production externalities, which arise when the production of a good creates spillover costs on society as a whole.

This lesson looks at one market in which negative externalities result from production and carefully walks through how we can use marginal benefit and marginal cost analysis to illustrate and explain this market failure.


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