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EXTERNALITIES - Coggle Diagram
EXTERNALITIES
positive externalities
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when an externality benefits the bystanders, a positive externality exists.
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negative externalities
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the intersection of the demand curve and the social-cost curve determenines the optimal output level
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internalizing an externality involves altering incentives -> ppl take account of the external effects of their action
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cause markets to be inefficient, thus fail to maximize total surplus