AP MicroeconomicsMarket Failure & Government
Externality
An externality is a cost or benefit imposed on a third party who is not directly involved in the production or consumption of a good or service.
Externalities arise when the actions of producers or consumers affect others who are not part of the market transaction. Negative externalities, like pollution, impose costs on others, while positive externalities, like education, create benefits. Externalities can lead to market failure and inefficient outcomes.
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Externalities →
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Public Goods & Externalities →
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