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In 1 or 2 sentences, define an externality and explain how the government makes companies take responsibility for negative externalities.

User Thangtn
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In economics an externality is the cost or benefit that affects someone who did not choose this. It is the true cost of a product that can be both positive or negative. Pollution can be an example of this. An educated labor force producing more is a positive example of this. The government rewards positive externality and punishes negative externality. Rewards can be surpluses and taxes can be punishments.

User NicoTek
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