In economics, an externality is an effect from one activity which has consequences for another activity...

In economics, an externality is an effect from one activity which has consequences for another activity but is not reflected in prices or costs. Provide an example of an activity you are aware of that has resulted in an external cost to the environment and/or human health.

Bonus: Explain how you would address the external cost you have identified.

Expert Solution

People in the economy burning crackers at the time of festivals and other events lead to a negative externality in the market. It produce harmful noices and smoke in the environment and cause disturbance for the pets and elderly.

The price of the crackers do not reflect the negative externality in the market. to reduce the negative externality in the market there should be increased taxes on the crackers, that will make them costly and people will reduce the amount of crackers they buy in the market. this will reduce the negative externality.

Rahul Sunny answered 2 years ago

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