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30 August, 14:28

When a negative externality exists, the private market produces?

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  1. 30 August, 16:26
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    The private market will produce more than the economically efficient output level. Also when there is a negative externality then the cost to producers will be less than the cost to society. Remember that a negative externality is a cost that is suffered by a third party as a result of an economic transaction. Also have in mins that externalities lead to market failure because the price equilibrium does not reflect the true costs and benefits of a product.
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