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Social Sci LibreTexts

10: Market Failure- Externalities

  • Page ID
    • 10.1: Introducing Market Failure
      Market failure occurs when the price mechanism fails to account for all of the costs and benefits necessary to provide and consume a good.
    • 10.2: Externalities in Depth
      Negative externalities are costs caused by an activity that affect an otherwise uninvolved party who did not choose to incur that cost.
    • 10.3: Government Policy Options
      The government can respond to externalities through command-and-control policies or market-based policies.
    • 10.4: Private Solutions
      Private actors will sometimes effectively address externalities and reach efficient outcomes without government intervention.