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Negative production externalities lead to over production
Every externality
problem can be conceived in two ways: if an action creates one type of
externality, failing to act creates the opposite type. The same underlying
problem could be defined in either way, yet the two types of externalities
typically have different levels of public visibility and very different policy
solutions. Negative externalities impose direct costs on society that tend to
be noticeable; positive externalities promise possible gains that are less obvious.
Solutions to a negative externality focus on ways to force the producer
to internalize the costs it imposes on others, through decreasing the activity
or forcing the producer to pay for it—inflicting burdens on the producer.
Solutions to positive externalities also focus on internalizing the costs, but
typically by encouraging more activity through paying for it—providing
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