Final answer:
Negative externalities are costs created by an economic activity that are not paid directly by the entity responsible for them. They affect third parties and can be environmental or social in nature.
Step-by-step explanation:
Costs that you create, but don't pay directly, are referred to as negative externalities. The term externality refers to the unintended consequences of an economic activity that affect third parties. In the context of economics, when a dam is built for electricity or flood control, it may cause negative externalities such as environmental damage or displacement of communities, which are costs incurred by society but not paid directly by the entity that created them. Explicit costs are the out-of-pocket costs, such as wages and rent, while implicit costs represent the opportunity costs of using resources that a firm already owns. For instance, using one's home as a retail store or working without a salary in one's own business are both implicit costs that also include depreciation of necessary goods, materials, and equipment. Similarly, social costs include both private costs incurred by firms and additional costs incurred by third parties outside the production process, like pollution.