Question
When a firm’s decision to produce decreases the
wellbeing of others, but the firm does not compensate those others. It is a case of______.Solution
Negative Production Externality (MSC > MPC) is whe re a firm’s decision to produce decreases the wellbeing of others, but the firm does not compensate those others. Examples include air and noise pollution from the production process, the dumping of waste and effects of deforestation .
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