(Answered) How is pollution a good example of a externalityHow is pollution a good example of a externality

➤ Why do free markets fail to address pollution?
Free markets fail because prices do not include external costs of pollution. When property rights are unclear and transaction costs are high, affected parties cannot negotiate efficient outcomes. Information gaps and collective action problems also hinder private solutions. Without regulation or incentives, firms underinvest in pollution control and society faces persistent environmental damage.