Also found in: Dictionary, Thesaurus.
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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved