Externalities refers to a cost or benefit imposed on a third party that is not involved in a market transaction. I
would like you to give me two examples of a positive and negative externality in the environmental realm (4
total). What are the benefits and the costs associated with each type of externality in your example? How do
we incentivize good behavior derived from positive externalities? How do we deter individuals or entities from
acting a certain way when talking about negative externalities?
Sample Solution
