production externality

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An external effect of production that harms or benefits someone else than the producer. An example of negative production externality is noise or air pollution; an example of positive production externality is pollination of nearby crops and orchards by the bees kept by a beekeeper for their honey. Typically, a negative production externality results in over-provision of the good produced, whereas a positive production externality leads to under-provision, relative to the social optimum.

Subjects: Economics.

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