Externalities always negatively impact third-parties. True False

False! While externalities can often be negative, such as pollution affecting nearby residents, they can also be positive. For instance, a well-kept garden can enhance neighborhood property values and provide aesthetic enjoyment to passersby. These positive spillover effects showcase how externalities can impact third parties in beneficial ways. When it comes to dealing with externalities, addressing them effectively is key. A common mistake is assuming that government intervention is always necessary. Many businesses will adopt social responsibility practices that reduce negative impacts voluntarily. Encouraging such practices can lead to creative solutions that benefit all parties involved without heavy-handed regulations.