How to define the term "external costs"

There are many acceptable definitions of "external costs" but if you have the basic understanding of what it is then you should be fine. Firstly you know that it is a negative effect/impact by "costs" and from "external" you know that it is put onto a third party and can arise from high social costs. Therefore a suitable definition would be something along the lines of; External costs are the negative effects put onto a third party as a consequence of an economic activity.

Answered by Fred E. Economics tutor

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