An externality is a situation in which

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An externality is a situation in which the private costs of a transaction or activity diverge from social costs, thereby affecting people who are not directly involved in the transaction or activity. These costs can be positive, such as the benefits of education or healthcare, or negative, such as pollution or traffic congestion. When private costs do not reflect the full social costs, this can lead to market failure and suboptimal outcomes.

An Externality Is a Situation in Which