Write a university essay as a student answering the question below 

Question: Explain the concept of an externality and show how externalities lead to market failure and inefficient allocation of resources.. Write 700 words

Your answer should have the information below

I. Introduction
•	Definition of externalities
II. Market Failure Due to Externalities
•	The divergence between private and social costs/benefits
•	The inefficient allocation of resources
•	Example: Pollution from a factory
•	Evidence: Ayres and Kneese (1969) argue that externalities can result in a market failure and cause inefficient resource allocation.
III. Negative Externalities
•	Definition and examples
•	The overproduction of goods and services that create negative externalities
•	The lack of private incentives to reduce negative externalities
•	Example: Pollution from a factory
•	Evidence: Tietenberg and Lewis (2016) explain that negative externalities lead to overproduction and inefficient resource allocation.
IV. Positive Externalities
•	Definition and examples
•	The underproduction of goods and services that create positive externalities
•	The lack of private incentives to produce positive externalities
•	Example: A neighbor's well-maintained garden
•	Evidence: Hackett and Dissanayake (2014) discuss the importance of internalizing positive externalities to ensure efficient resource allocation.
V. Policy Solutions for Externalities
•	Taxes, subsidies, and regulations
•	Internalizing externalities to align private incentives with social objectives
•	Example: Carbon tax to reduce greenhouse gas emissions
•	Evidence: Stiglitz (1989) suggests that governments can use policy interventions to overcome market failures caused by externalities.
VI. Conclusion
•	Summary of the concept of externalities and their impact on resource allocation
•	The importance of policy interventions to address market failures caused by externalities.

3. Discuss, using examples, the main differences between positive and negative externalities. What forms of regulation might governments use to mitigate the effects of negative externalities?

I. Introduction
•	Definition of positive and negative externalities
II. Positive Externalities
•	Definition and examples
•	Benefits of positive externalities to third parties
•	Example: A well-maintained garden
•	Evidence: Hackett and Dissanayake (2014) explain that positive externalities can enhance the well-being of third parties.
III. Negative Externalities
•	Definition and examples
•	Harmful effects of negative externalities to third parties
•	Example: A factory that emits pollutants
•	Evidence: Tietenberg and Lewis (2016) argue that negative externalities can have significant impacts on the environment and public health.
IV. Regulation of Negative Externalities
•	Taxes as a form of regulation
•	Subsidies as a form of regulation
•	Regulations as a form of regulation
•	Example: Emission standards for factories
•	Evidence: Ayres and Kneese (1969) suggest that regulation is an effective way to internalize negative externalities.
V. Conclusion
•	Summary of the differences between positive and negative externalities
•	Discussion of the importance of regulation to address negative externalities
•	Implications for sustainable resource management
•	Evidence: Stiglitz (1989) emphasizes the importance of addressing negative externalities to promote sustainable economic development.