Individuals or firms engaging in private behavior that has negative social consequences are said to be creating

Question

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The term externality refers to the impact of an economic activity on third parties who are not directly involved in that activity. When private behavior generates negative consequences for society, this is considered an externality, and it is thought to be a market failure because the social costs are not reflected in the private costs incurred by the individual or firm.

Individuals or Firms Engaging in Private Behavior That Has Negative