The existence of external costs means that

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External costs, also known as negative externalities, occur when the production or consumption of a good or service imposes costs on third parties not involved in the transaction. This means that the private cost to the producer is less than the total cost to society, including both private and external costs. Therefore, the producer's marginal cost is less than the marginal social cost of production, as the latter includes these external costs.

The Existence of External Costs Means That