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External Cost
(redirected from Negative externalities)

   Also found in: Dictionary/thesaurus, Wikipedia 0.02 sec.
External Cost
The cost of a transaction to parties who do not directly participate in it. For example, a merger can drive a competitor out of business, which results in layoffs and reduced wealth, which can hurt a community. A transaction may result in a factory opening in one city and one closing in another. An external cost is also called negative externality. See also: Externality.


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In health care, the uninsured create negative externalities.
However, a nuanced understanding of globalization accounts for negative externalities such as human-induced environmental change and the emergence and recrudescence of infectious diseases.
The government should intervene when there are positive or negative externalities ("neighborhood effects") and when strictly voluntary exchange is impossible.
 
 
 
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