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Externality

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What is an externality?
Why might externalities lead a firm to discharge too much pollution into a river?
Congress has passed a law that limits the level of cotton dust within textile factories. Why might a textile firm allow too much cotton dust within it workplace?

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An externality is a spill over from an economic activity. It is often referred to as a by-product of the market mechanism (supply equals demand). Negative externalities are often viewed as examples of market failure, in other words, the market mechanism creates a level of consumption / production that is higher than ...

Solution Summary

This discusses the impact of externality on organizations

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