An external benefit is a benefit from an activity that falls on a third party who is not a party to the activity.

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An external benefit, also known as a positive externality, is a benefit received by individuals or groups who are not directly involved in the production or consumption of a good or service. This could include benefits such as reduced pollution leading to improved air quality for nearby residents or increased education resulting in a more skilled workforce that benefits the broader economy.

An External Benefit Is a Benefit from an Activity That