If there are no externalities a competitive market achieves economic efficiency. If there is a negative externality, economic efficiency will not be achieved because too much of the good will be produced. a deadweight loss will occur that is equal to the area under the demand curve for the good. too little of the good will be produced. economic surplus is maximized.
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too much of the good will be produced.
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a
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too little of the good will be produced.
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economic surplus is maximized.
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Externalities are the cost or benefits that are incurred or received by the third person by the deal between two other parties. Externalities are positive or negative It means externalities sometimes harmful third person or sometimes beneficial.
The cost and benefits can be other society to organization or organization to the society. it means organization society as a whole.
Most of the time Externalities are negative like pollution is a well-known negative externality, It is negative when the social costs outweigh the private costs. Positive externalities occur when society gets to benefit from the organization or it occurs when both society or organization gets postive gain.
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