EXTERNALITY

Outside force, such as social and environmental benefits and costs, not included in the market price of goods and services being produced. Thus, costs not born by those who occasion them, and benefits not paid by the recipients. Some economists suggest that externalities should be internalised, if they are known to have a significant effect on the demand or cost structure of a product, that is, corrections should be made, to allow for them when calculating marginal cost. Marginal cost thus becomes a social opportunity cost, or true cost. Scialabba (1998)