Draw a Negative Externality

question 26

Essay

Draw a negative externality.Clearly label the axis and the equilibrium that would occur were there no external costs and the equilibrium with external costs.Explain the diagram and the resulting problem that negative externalities create from the standpoint of economic efficiency.

---

Definitions:

Capacity Allocation

Capacity allocation refers to the process of distributing available resources or capacity among various products, services, tasks, or activities.

Responsiveness

The ability of a company or system to rapidly respond to changes in demand or market conditions.

Demand Satisfaction

The degree to which the needs and desires of customers for a product or service are met by a company.

Over-Capacity

The condition of having more production or service capacity than currently needed, which can lead to inefficiencies, increased costs, and downward pressure on prices.