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Chapter 33: Private Costs and Benefits, Externalities and Social Costs and…
Chapter 33: Private Costs and Benefits, Externalities and Social Costs and Benefits.
Externalities
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Example
When there is business expansion on an airport company and increases the amount of planes and airports in an area. Creating more noise pollution for locals near the area. This is a negative externality.
When a new publicly-funded flood barrier is built, people who have been affected by flooding in the past can continue to work and earn their usual wages. This is a positive externality.
Definition
Where the action of a producer or a consumer give rise to side effects on third parties, (Those not directly involved in the decision making)
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