Question

Definition of externality

Answer 1

An externality is when a market exchange affects someone who is not involved in the transaction, which can be positive or negative. Examples include pollution as a negative externality and a well-maintained garden as a positive externality. Internalizing externalities involves compensating affected third parties.

Step-by-step explanation:

An externality is a situation where a market exchange impacts a third party who is not involved in the transaction. Externalities can be either positive or negative, causing benefits or detriments to those who are not part of the exchange. A classic example of a negative externality is pollution, where producers may not bear the full social costs of their actions, leading to the overproduction of harmful substances. Conversely, a positive externality might occur when someone's well-maintained garden enhances the neighborhood's beauty, providing enjoyment to others without compensation. Economists suggest internalizing externalities so that those causing them either compensate others for negative effects or receive compensation for positive contributions.

Answer 2

"a side effect or consequence of an industrial or commercial activity that affects other parties without this being reflected in the cost of the goods or services involved, such as the pollination of surrounding crops by bees kept for honey."

That is copied and pasted from online. Do not use this word for word. I, myself, did not write this.