1ExternalitiesCHAPTER15Externalities in Our LivesAn externalityis a cost or benefit that arises from production and falls on someone other than the producer, or a cost or benefit that arises from consumption and falls on someone other than the consumer. A negative externalityimposes a cost and a positive externalitycreates a benefit. A production externalityis associated with the process of supplying a good, while a consumption externalityis associated with the process of consuming it.Externalities in Our LivesThe four types of externality areNegative production externalitiesPositive production externalitiesNegative consumption externalitiesPositive consumption externalities
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