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Homeowners planting trees do not consider the cleanup costs imposed on their neighbors.
The market equilibrium quantity of trees is socially optimal for all parties involved.
Negative externalities can lead to an over-allocation of resources to activities that generate them.
Government intervention may be necessary to correct for the inefficiencies caused by negative externalities.
Neighbors benefit from the shade and aesthetic appeal of the trees, which offsets the cleanup costs.
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Negative Externalities in Consumption
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