Gregory Mankiw
In the presence of externalities, society’s interest in a market outcome extends beyond the well-being of buyers and sellers who participate in the market; it also includes the well-being of bystanders who are affected indirectly…. The market equilibrium is not efficient when there are externalities. That is, the equilibrium fails to maximize the total benefit to society as a whole.
Content: Quotation | Author: Gregory Mankiw | Source: Farnam Street | Subjects: Capitalism, Economics