Under non-market mechanism

Consider the following statements:

1. Under market mechanism the demand and supply are equal.
2. The price is equilibrium when the goods demanded and supplied are equal.
3. When the price decreases, supply decreases.
4. When the price Increases, supply increases.

Of these statements

Market mechanism is one

In economics the input falls into which of the following?

1. Natural resources
2. Labour
3. Capital
4. Technology

Of these

In the case of 'air pollution' when a factory emits smoke that harms the local people and damages their health & property and yet the firms does not pay for these costs.

The above effect is called