Liability for Defective Products as an Example of Internalizing Externalities
Liability law provides a clear example of internalizing costs by ensuring that if a company sells a product with a design flaw that results in injury, the firm is legally required to pay for the resulting damages. This holds the producer accountable for the harm their product causes.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.10 Market successes and failures: The societal effects of private decisions - The Economy 2.0 Microeconomics @ CORE Econ
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From an economic standpoint, a legal rule that holds a manufacturer 100% liable for any injury resulting from their product, even when the consumer uses it improperly, is the most efficient way to ensure product safety because it forces the company to internalize all possible costs.