👉 Firms' "fumes" refer to the negative externalities and social costs that arise from their operations, which are not reflected in market prices. These can include pollution of air, water, and soil, noise pollution, waste generation, and the depletion of natural resources. For instance, a manufacturing firm might emit harmful pollutants into the air, contributing to respiratory issues in nearby communities. Similarly, a factory that discharges untreated wastewater can contaminate local water sources, affecting both human health and ecosystems. These fumes also encompass social costs like increased healthcare expenses and reduced quality of life for affected populations. While firms aim to maximize profits, their activities often impose significant costs on society that are not borne by the companies themselves, leading to a misalignment between private and social interests.
