Question

Write a one-page essay in which you explain why, in the absence of government environmental regulation, competitive markets Overproduce goods whose production involves the creation of negative externalities. Be sure to provide an example of a good that generate of negative externalities, explain the nature of external costs and the two-supply curve, and describe how they lead to different market equilibrium. Describe why allowing firms to pollute amounts to production subsidy, and why this is inefficient, creating an economic motive for government policy intervention. Draw and carefully label a diagram to illustrate your arguments

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