Economics Externalities Questions
The social cost of a negative externality refers to the overall cost incurred by society as a result of the negative impact caused by the externality. It includes both the private cost borne by the individuals directly involved in the activity generating the externality, as well as the external cost imposed on third parties who are not directly involved in the activity. The social cost takes into account the economic, environmental, and social consequences of the negative externality, such as pollution, congestion, or health issues.