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Negative and positive externalities of airline industry

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Please discuss how positive and negative externalities affect the airline industry

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Solution Summary

An externality of an airline industry is defined in the solution.

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An externality is the effect of a transaction between two parties on a third party who is not concerned to, or played any role in the carrying out of that transaction.

Negative externalities are costs that some people bear being compensated.

Positive externalities are benefits that some people get without paying for those benefits.

Airline travel has negative externalities causing SMC to lie above PMC. As a result, the market will generate an equilibrium quantity of ...

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