Cause and Individual Examples of Market Failure with a Negative Externality

In Section 1, externalities are introduced and market failures, where the socially optimal output is not the same as what the market produces by itself:

1. Describe a real-world negative externality.
2. In your externality, identify who are the participants in the market and who receives the spillover.
3. How are the incentives for the firm misaligned from the rest of society to make the externality?
4. Reply, with potential solutions, to one or more of your peers' posts.