ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -They are sometimes known as spillovers and third-party costs and may arise due to manufacturing and consumption. Therefore, pollution is considered an external cost because its costs and expenses to the environment and surroundings are not reflected in the pricing of the commodity, which has caused the pollution.

Detailed explanation-2: -Conversely, it was also found that foreign trade in India promotes economic growth at the expense of the environment (29). Sometimes, international trade can reduce the pollution levels of developed countries and exacerbate the environmental pollution level of developing countries (30).

Detailed explanation-3: -Pollution is a negative externality. Economists illustrate the social costs of production with a demand and supply diagram.

Detailed explanation-4: -Externalities pose fundamental economic policy problems when individuals, households, and firms do not internalize the indirect costs of or the benefits from their economic transactions. The resulting wedges between social and private costs or returns lead to inefficient market outcomes.