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Negative externality
A harmful externality; that is, a harmful effect of one economic agent's actions on another. Considered a distortion because the first agent has inadequate incentive to curtail the action. Examples are pollution from factories (a production externality) and smoke from cigarettes (a consumption externality).
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- Part of Speech: noun
- Synonym(s):
- Blossary:
- Industry/Domain: Economy
- Category: International economics
- Company: University of Michigan
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