Whenever there is a negative externality at play, the results will be a tragedy of the commons?

Define externalities. If there is a negative externality at alocal, please propose on how to solve this problem.

Consider the market for steel. Suppose that a steel manufacturing plant dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the plant. Producing an additional ton of steel imposes a constant external cost of $165 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for steel. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $165 per ton. 1100 990 Social Cost 880 770 Supply (Private Cost) 660 550 440 330 220 Demand 110 (Private Value) 1 2 4 7 QUANTITY (Tons of steel) PRICE (Dollars per ton of steel)

Explain how externalities can be solved.

Consider the market for steel. Suppose that a steel manufacturing plant dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the plant. Producing an additional ton of steel imposes a constant external cost of $525 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for steel. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $525 per ton. 1500 1350 Social Cost 1200 1050 Supply (Private Cost) 1.5 900 750 2.5 600 450 300 3.5 Demand 150 (Private Value) 4 0. 4.5 0. 1 3. 4 QUANTITY (Tons of steel) 5.5 tons. The market equilibrium quantity is 3.5 tons of steel, but the socially optimal quantity of steel production is tax of $525 per ton To create an incentive for the firm to produce the socially optimal quantity of steel, the government could impose a of steel. 2. 3. 5, PRICE (Dollars per ton of steel)

The graph shows the unregulated market for electricity.   Suppose that at every quantity produced, the marginal external cost of electricity equals the marginal private cost of production.   To show the market outcome, draw the following four items on the graph:   1. Draw a point to show the marginal social cost when the utility produces 500 kilowatts per day. Label it 1. 2. Draw the marginal social cost curve. Label it MSC . 3. Draw a point to show the electricity produced and its marginal social cost. Label it 2. 4. Draw a shape to show the deadweight loss created. Label it DWL . >>> Draw only the objects specified in the question.

What is externality?

Why is it socially efficient to set marginal benefits equal to marginal costs rather than abating until total benefits equal total costs?

Air pollution creates a negative externality—a cost suffered by a third party as a result of an economic transaction. A standard solution to a negative externality is a Pigouvian tax, a tax that raises the marginal private cost of pollution emissions to the level of the marginal social cost. The socially optimal quantity of pollution emissions is then determined by the intersection of the marginal private benefit, or demand, curve and the marginal social cost curve. The article notes that "putting a dollar value on the benefits of cleaner air has been difficult." Assuming this problem has been resolved, in the accompanying diagram, move the endpoints of line Smarginal social cost to show the marginal social cost curve. Then move the line labeled "Tax" to show the amount of the tax needed to limit emissions to the socially optimal level.

What is externality.    Explain its both types negative and positive too.