Find solution
What are the basic economic terms?

What is an external cost, in economic terms?

  • What is an external cost, in economic terms? And what is an external benefit?

  • Answer:

    Externalities are unintended consequences (sometimes described as "spillover") resulting from economic transaction. There are two types of externalities: 1) External Costs: a negative, unintended effect Ex: automobiles are intended to help people travel more efficiently, but exhaust emitted from automobile results in a tremendous "external cost" to the government, and thus society through taxation (an undesired effect) 2) External Benefit: a positive, unintended effect Ex:An increase in production of XYZ automobiles were intended to satisfy increased demand. As a result, the demand for mechanics specializing in XYZ cars increase, thereby fueling more jobs (a desirable effect). Hope that explains.

Ahmaenda... at Yahoo! Answers Visit the source

Was this solution helpful to you?

Other answers

External costs - things that are expenses of producing/selling a product but the supplier doesn't pay for. So the sale of the product tends to not include external costs, but society as a whole still brunts the costs. Example: pollution; bad health from cigarettes, negative associations with alcohol External Benefit - things that pay in the production/selling a product, but the supplier doesn't collect it. Society as a whole still benefits. Example: Health care - Your doctor doesn't get paid for all the sick days he helps cut down on to the overall economy, mass transit may cut down on pollution. Externalities is a problem in economic forecasts and throws off equilibrium price as the Utopian Market Economy Theory assumes all costs and benefits are accounted for.

JuanB

Related Q & A:

Just Added Q & A:

Find solution

For every problem there is a solution! Proved by Solucija.

  • Got an issue and looking for advice?

  • Ask Solucija to search every corner of the Web for help.

  • Get workable solutions and helpful tips in a moment.

Just ask Solucija about an issue you face and immediately get a list of ready solutions, answers and tips from other Internet users. We always provide the most suitable and complete answer to your question at the top, along with a few good alternatives below.