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Economists care about externalities because they represent costs or benefits incurred by third parties not directly involved in a transaction, leading to market failures. Externalities can distort resource allocation, resulting in overproduction or underproduction of goods and services. Understanding externalities helps economists design policies to internalize these effects, promoting efficiency and equity in the market. Addressing externalities is crucial for achieving optimal social welfare.

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2mo ago

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What is government's role in controlling externalities in the American economy?

Government tries to encourage positive externalities and limit negative externalities..


What is government role in controlling externalities in the American economy?

Government tries to encourage positive externalities and limit negative externalities..


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What do you understand by the market?

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What is government's role in controlling externalizes in the American economy?

Government tries to encourage positive externalities and limit negative externalities..


What is governments role in controlling externalizes in the American economy?

Government tries to encourage positive externalities and limit negative externalities..