Detrimental Externalities Like Pollution Are a Shortcoming of the Market

question 59

Essay

Detrimental externalities like pollution are a shortcoming of the market mechanism.Do they occur in free market economies alone? Explain with examples.

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Definitions:

Comparative Advantage

The capacity for a person, company, or nation to generate a product or offer a service at a lesser opportunity cost compared to its rivals.

Opportunity Cost

The expense incurred by not choosing the second-best option available when a decision is made or an action is taken.

Pure Capitalism

An economic system characterized by private ownership of the means of production and where investments, distribution, income, production, and prices are determined by the market.

Owns No Resources

The condition of not having access to or control over any assets, capital, or means of production.