Answer:An externality is a cost or benefit to a third party who has no control over how that cost or benefit was created. Externalities can be both positive or negative and can come from producing or consuming a good or service. Pollution is a common negative externality whose cost affects society as a whole.
An externality is an indirect effect of an action. It is also known as the spillover effect, given that the cost or benefit of the action effects a third party who did not agree to the initial action. Externalities can be positive or negative. A positive externality happens when a third party reaps the benefit of something they did not cause, such as flood protection provided by a dam. A negative externality happens when a third party bears the cost for a problem they did not cause, such as pollution from a factory that releases toxins into the nearby water system.
