Externalities are side effects or by-products of actions that are not included in standard cost accounting systems.

Question

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This is the definition of externalities, which refer to the unintended impacts and costs or benefits of economic activities that affect third parties who are not involved in the transaction. Examples of externalities include pollution, traffic congestion, noise, and social benefits of education. They are often not reflected in market prices or private costs, leading to market failures and inefficiencies that require government intervention or private solutions to address.

Externalities Are Side Effects or By-Products of Actions That Are