Economics Externalities Questions
A network externality refers to the positive or negative impact that the use or adoption of a product or service has on the value or utility of that product for other users. It occurs when the value of a product increases as more people use it, leading to a positive network externality, or decreases as more people use it, resulting in a negative network externality.
On the other hand, a negative production externality refers to the negative impact that the production of a good or service has on third parties who are not involved in the production or consumption process. It occurs when the production of a good or service generates costs or harms to individuals or the environment, such as pollution or noise, which are not accounted for by the producers and consumers involved in the transaction.
In summary, the main difference between a network externality and a negative production externality is that the former relates to the impact on the value or utility of a product for other users, while the latter refers to the negative impact on third parties caused by the production process.