A negative externality affects market efficiency in a manner similar to

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A negative externality is when the production or consumption of a good imposes costs on third parties. This leads to an overproduction and overconsumption of the good, as the market is not taking into account the full cost. Similarly, a common resource, such as a fishery or a forest, is overused because the costs are not fully taken into account. Therefore, both negative externalities and common resources lead to a market inefficiency, as the market is not producing the optimal quantity of the good. Excludable goods and private goods, on the other hand, do not have externalities and the market is able to produce an efficient outcome. Public goods have positive externalities and the market may underproduce them, but this is not relevant to the question.

A Negative Externality Affects Market Efficiency in a Manner Similar