Production Externality


Production Externality
Costs of production that must ultimately be paid by someone other than the producer of a good or service. Production externalities are usually unintended and can have economic, social and environmental side effects. Production externalities can be measured in terms of the difference between the actual cost of production of the good and the real cost of this production to society at large.

There are many examples of externalities, such as pollution and depletion of natural resources. A logging company can pay for the cost of a tree that they remove, but the cost of replacing an entire forest once it is gone is exponentially more than the sum of its lost trees. Freeway traffic jams and health problems that arise from breathing secondhand smoke are further examples of externalities in production.


Investment dictionary. . 2012.

Look at other dictionaries:

  • externality — externality, externalities In economic theory it is generally recognized that some of the costs and benefits of economic activities (production, exchange, and the like) are not reflected in market prices. So, for example, air pollution caused by… …   Dictionary of sociology

  • Externality — External redirects here. For other uses, see External (disambiguation). In economics, an externality (or transaction spillover) is a cost or benefit, not transmitted through prices,[1] incurred by a party who did not agree to the action causing… …   Wikipedia

  • Cobb–Douglas production function — A two input Cobb–Douglas production function In economics, the Cobb–Douglas f form of production functions is widely used to represent the relationship of an output to inputs. Similar functions were originally used by Knut Wicksell (1851–1926),… …   Wikipedia

  • ВНЕШНИЙ ЭФФЕКТ, СВЯЗАННЫЙ С ПРОИЗВОДСТВОМ/ПРОИЗВОДСТВЕННЫЕ ЭКСТЕРНАЛИИ — (production externality) Внешний эффект производственной деятельности, не порождающий ни выгодных, ни вредных последствий для лица или фирмы, контролирующих эту деятельность. Внешний отрицательный эффект от производственной деятельности – это,… …   Экономический словарь

  • Coase theorem — In law and economics, the Coase theorem (pronounced /ˈkoʊs/), attributed to Ronald Coase, describes the economic efficiency of an economic allocation or outcome in the presence of externalities. The theorem states that if trade in an externality… …   Wikipedia

  • Marginal cost — A typical marginal cost curve with marginal revenue overlaid In economics and finance, marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a… …   Wikipedia

  • Social cost — In economics social cost is defined as the sum of private and external costs. Economic theorists ascribe individual decision making to a calculation costs and benefits. Rational choice theory assumes that individuals only consider their own… …   Wikipedia

  • Glossary of environmental science — This is a glossary of environmental science.Environmental science is the study of interactions among physical, chemical, and biological components of the environment. Environmental science provides an integrated, quantitative, and… …   Wikipedia

  • Carbon tax — Part of a series on Green economics Concepts …   Wikipedia

  • Sustainability — Achieving sustainability will enable the Earth to continue supporting human life as we know it. Blue Marble NASA composite images: 2001 (left), 2002 (right). See also: Sustainable development Sustainability is the capacity to endure. For humans,… …   Wikipedia