223k views
4 votes
What is an externality? how do externalities relate to socially optimal quantity?

User Skimobear
by
7.4k points

1 Answer

7 votes
An externality in business or economics is where an industrial activity has an unexpected side effect which does not figure in the cost of the goods and services involved.  For example, I worked many years at a large mine. Just the existence of the mine there meant it was a no-hunting area so a side effect was that the moose used it as a refuge during hunting season which as a side effect was beneficial to the moose (and deer). Another example is that we used to crush mine rock for the haulroads for winter traction. As a result, it was found that the fines from this were concentrated with copper values so were put in the mill for processing-an unexpected outcome.
User Mausam Sharma
by
7.8k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.