Dealing with Externalities

As we have stated, the final market price of many goods is not at the socially optimal level. The socially optimal price takes into account the benefit or damage caused by the "spillover" effect. Many remedies have been suggested for forcing buyers and sellers to "realize" the impact of externalities when negotiating price. Some of the suggested solutions use the private market while others argue for government policy.

• Private Sector Solutions
• Public Sector Solutions

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