Economics Externalities Questions
A network externality refers to the positive or negative impact that an individual's consumption or production of a good or service has on the utility or welfare of others. It occurs when the value of a product or service increases as more people use or adopt it. On the other hand, the optimal level of pollution refers to the level of pollution that maximizes social welfare or economic efficiency. It is the point where the marginal cost of reducing pollution equals the marginal benefit of reducing pollution. In summary, the difference between a network externality and the optimal level of pollution lies in their focus - network externality relates to the impact on utility or welfare, while the optimal level of pollution relates to the level of pollution that maximizes social welfare or economic efficiency.