Property rights define who owns resources and how they can be used. Clear and enforceable property rights can help address the issue of externalities. For example, if a factory emits pollution affecting a nearby fishery, clearly defined property rights would determine who has the right to do what. If the fishery has the right to clean water, then the factory would need to compensate them or reduce its pollution. On the contrary, if the factory has the right to emit a certain level of pollution, the fishery might need to adapt or compensate the factory to reduce its emissions. When property rights are well-defined and can be easily traded, the Coase theorem suggests that parties can negotiate to achieve efficient outcomes regardless of how the initial rights are distributed.

Positive externalities are typically associated with beneficial effects on third parties and are viewed as under-represented in market transactions. However, there are scenarios where positive externalities might lead to undesirable outcomes. For instance, if a government overestimates the external benefits of a particular product or service and thus over-subsidises it, it could lead to inefficiencies or misallocation of resources. Another example could be the "tragedy of the anticommons", a situation where multiple individuals have rights to exclude others from using a scarce resource, and they underuse it, contrary to the "tragedy of the commons" scenario.

While government intervention, such as taxes, subsidies, and regulations, is a common remedy for externalities, its effectiveness can vary based on the accuracy of information, the efficiency of the government, and potential unintended consequences. Implementing the right level of tax or subsidy requires precise knowledge of the externality's magnitude, which might not always be available. Additionally, government actions can sometimes be influenced by political pressures or lobbying, which might lead to policies that don't necessarily align with societal welfare. Also, interventions might lead to other inefficiencies or problems, such as black markets arising from price caps. Thus, while government intervention can address externalities, it's essential to evaluate each intervention's context and potential ramifications.

Pecuniary externalities arise from changes in market prices due to an economic activity. For instance, when a new firm enters a market and increases the supply of a good, this might decrease the price, negatively affecting other suppliers. However, this is merely a price effect and doesn't necessarily result in a welfare loss for society. On the other hand, technological externalities occur when one firm's or consumer's actions directly affect another firm's production function or a consumer's utility function without any market transaction. For instance, pollution from a factory adversely affecting the health of nearby residents is a technological externality. Only technological externalities lead to deadweight losses and thus are of primary concern when analysing welfare effects.

Externalities and public goods are both central concepts in the study of market failures. An externality occurs when the consumption or production of a good affects third parties who did not choose to be involved in that transaction. This can lead to market outcomes that are not socially efficient. Public goods, on the other hand, are non-excludable and non-rivalrous, which means that they are available for everyone to consume and one person's consumption doesn't reduce availability for others. The issue with public goods arises because of the free-rider problem, where individuals can benefit from the good without paying for it. Although the two concepts are distinct, they both highlight scenarios where private markets might not allocate resources efficiently.