Question

Need help forming an idea how to answer the question below.

1. There are several methods for reducing the costs of negative externalities. Why might some of these be difficult to implement at the global level?

Answer 1

externality is defined as the consumption or production done by any party, which effects the third party also is called externality.

There can be two types of externality. Both negative and positive.

A positive externality is when marginal social benefit is more than private benefits.

a negative externality is when social cost is more than private cost.

As shown above, externality is an automatic process. In simple words, if there is any consumer or production of any good and services by any individual or firm is being consumed or produced. then these externality will come into existence automatically.

Ways to reduce it:-

1) by imposing pollution tax.

2) by permitting license to the industry which are giving birth to negative externality.

3) by imposing fines.

4) others:- by making people aware towards this problem van also be proved as helpful.