Answer :
In the absence of externalities, the "invisible hand" leads a market to maximize total benefit to society from that market.
come in both good and bad forms. They exist when the deeds of one person or thing have an impact on the life and welfare of another. Positive consumption, positive production, negative consumption, and negative production externalities are the four main categories of externalities in economics. Positive externalities typically have a positive impact, as suggested by their names, whilst negative ones typically have the opposite effect.
- An externality is a cost or benefit to an unrelated third party that results from the production or use of a good or service.
- Market failure is the inefficient allocation of products and services in the market, whereas equilibrium is the optimum balance between buyers' benefits and producers' costs.
- Externalities create market failure because the pricing equilibrium of a good or service does not fairly reflect the full costs and advantages of that good or service.
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