Question

Describe a situation where you experienced a positive or negative externality or free-riding by you or someone else. Why are these situations problematic?

Please post a new different response

Answer 1

It shall be noted that Negative externalities occur when production and/or consumption impose external costs on third parties outside of the market for which no appropriate compensation is paid. This causes social costs to exceed private costs.

Describing a negative externality experienced.

Residing in an industrial area subject my family members to acute pollution from big chimneys, factories & big manufacturing units. This poses a health hazard to the old-aged in terms of breathing & lung problems. The young members of my family face dizziness, nausea, and breathlessness.

This has increased the medical expenses of the family members. Hence, the given situation is problematic. The manufacturing units producing pollution does not compensate for increased health hazards for the people residing nearby. The situation creates panic like situation in the area. The life expectancy of the people is expected to be lowered. There is no fresh air to breathe and clean water to drink. The ponds & lakes in the neighborhood have turned into a dumping ground for industrial wastes. The foul smell is pungent & strong during night time that leads to disturbed sleep.