Question

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

Answer 1

An externality is an unplanned effect of industrial or commercial doings that affects others without being reflected in the cost of the goods or services involved. An example of this would be the air and water pollination by the company that produces cleaning products; it is an externality of the production prosses of making the cleaning solutions.

The government can respond to externalities through command-and-control policies or market-based policies, which often means that the company responsible for the pollution has to pay fines or reverse the pollution they have caused.

Step-by-step explanation:

Answer 2

Externality is an effect of an industrial or commercial doings that affects other parties without this being reflected in the cost of the goods or services involved, such as the pollination of surrounding crops by bees kept for honey. The government can respond to externalities through command-and-control policies or market-based policies.