Is it a benefit or a cost?。
benefit or cost is generated by a person or group of。
Individuals or groups experiencing benefits or costs are not involved in their production。

Externalities are important because they are part of the actual cost or value of an action, although sometimes difficult to quantify。Externalities are not always an unconscious side effect, and sometimes firms know they are producing externalities, especially negative externalities。However, they ignore the fact out of convenience。

What are the types of externalities?？

Externalities can be either positive or negative。Positive externalities will benefit the recipient in some way, such as reducing the costs already incurred。negative externalities to the detriment of the receiving party, such as to its property。

Similarly, externalities can be production or consumption externalities。Production externalities are related to the production of services or goods.。For example, a factory that produces too much noise when producing goods。consumption externalities arise when services or goods are consumed。For example, smoking produces secondhand smoke。

What are environmental externalities?？

Environmental externalities are externalities that affect ecosystems。Pollution is an example of the negative environmental externalities generated by many companies' production processes, which can be in the form of air pollution, water pollution, or any other form of harm to the environment。

Environmental externalities may also be associated with overuse of ecological resources。For example, overfishing does not necessarily pollute an area, but reduces or eliminates fish stocks in an area.。This could disrupt parts of the region's food chain and affect the region's ecosystem in the future.。

Examples of positive and negative externalities？

Firms with strong workforce training programs can provide positive externalities to peripheral firms in similar industries。For example, if a region has three factories that make cars, and one of the factories provides excellent worker training, then the other factories will benefit from well-trained labor resources。They do not influence the training practices of the third firm, but benefit from。

Another example of a positive externality is a neighborhood garden。The people who sow the garden take care of the plants, they benefit from the work done by harvesting what grows。At the same time, other nearby residents also benefit from the pleasant views of the growing flowers and plants。

An example of a negative externality is urban transport。If too many people move to a city, the city's roads will become congested and traffic will become a common problem。This slows down travel and causes urban residents to bear higher driving costs。Each driver cannot control the number of other drivers, but each driver creates negative externalities for other drivers in the form of increased traffic。

Another example of a negative externality is noise pollution。Whether it's a noisy bar with a band or someone playing music without headphones on public transport, people in the hearing range are experiencing the negative externality of not being able to listen to the music of their choice or enjoy the quiet。

What is the relationship between market failure and externality?？

Market failures occur when goods or services cannot be allocated efficiently, sometimes because the actual costs and benefits of the goods or services are not properly considered。

Market failures are related to externalities, which can lead to an inability to assess the actual cost or benefit of something。

For example, a company polluted a local river during the production of clothing。The company will not bear any costs for polluting the river, instead, residents in nearby areas who cannot swim in the river, eat fish caught in the river or drink the water from the river will bear the costs.。In an efficient market, companies that pollute rivers will bear the costs of pollution rather than ignore them。Market failure occurs when cost-creating firms ignore this cost。

Similarly, if a company provides strong job training to employees, thereby benefiting those competitors who hire these employees, the company cannot fully realize the value of its training program, and instead, some of the value is captured by competitors。In an efficient market, companies providing training would retain the value of their training programs, while competitors would have to pay for their own。

What are the causes of externalities?？

One of the main causes of externalities is unclear or ill-defined property rights.。When the ownership of a good is unclear, there is an incentive to consume as much of that good as possible because the consumer will not bear the full cost of that consumption。This situation became known as the "tragedy of the commons."。

For example, without considering property ownership, it is almost impossible to define the ownership of wild animals when they cross different areas。Hunters are motivated to hunt as many animals as possible because they have no clear ownership。Since all hunters are similarly incentivized, animals in an area can easily be over-hunted as each hunter seeks to maximize profits。

How to Overcome Negative Externalities？

Overcoming the effects of negative externalities is often the task of government。

In order to overcome negative externalities, the party producing the externality must be made to bear more of the true cost of the externality it produces.。For example, a company that pollutes its area because of its production facilities should bear the cost of that pollution。This can be achieved by taxing firms to compensate for the negative externalities they generate or by direct intervention to get firms to reduce pollution。This tax is called the Pigou tax, as the economist Arthur C. Pigou (Arthur C..Pigou) is named after。

One example is a carbon tax.。Under such a system, companies would pay taxes based on the amount of carbon they release into the atmosphere.。By charging firms for the pollution they cause, the government will reduce market failures and force firms to bear the true cost of their production。

Alternatively, the government could set limits on the amount that businesses are allowed to pollute。If they wish to continue to expand production, this will motivate them to reduce the negative externalities generated。