三 externalities Externality something that result from the actions of a person or persons that affect others who are not parties to the original action one party undertaking an action to gain a benefit, while another party has to bear some cost associated with that action Negative externality the cost that the other people have to carry Positive externality without some form of intervention or market adjustment, the producers in each cases do not pay that cost Summarize the government can internalize the externality by taxing goods that have negative externalities and subsidizing goods that have positive externalitiesExternalities ▪ Externality ▪ something that result from the actions of a person or persons, that affect others who are not parties to the original action. ▪ one party undertaking an action to gain a benefit, while another party has to bear some cost associated with that action. ▪ Negative externality ▪ the cost that the other people have to carry. ▪ Positive externality ▪ without some form of intervention or market adjustment, the producers in each cases do not pay that cost. ▪ Summarize: ▪ the government can internalize the externality by taxing goods that have negative externalities and subsidizing goods that have positive externalities