ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A negative externality exists when a cost spills over to a third party. A positive externality exists when a benefit spills over to a third-party. Government can discourage negative externalities by taxing goods and services that generate spillover costs.

Detailed explanation-2: -A negative externality exists when the production or consumption of a product results in a cost to a third party. Air and noise pollution are commonly cited examples of negative externalities.

Detailed explanation-3: -An externality can be both positive or negative and can stem from either the production or consumption of a good or service. The costs and benefits can be both private-to an individual or an organization-or social, meaning it can affect society as a whole.

Detailed explanation-4: -For example, education is a positive externality of school because people learn and develop skills for careers and their lives. In comparison, negative externalities are a cost of production or consumption. For example, pollution is a negative externality that results from both producing and consuming certain products.