costs of the pipeline project.

Access for free at openstax.org
12 • Key Terms 297

Key Terms

additional external cost additional costs incurred by third parties outside the production process when a unit

of output is produced

biodiversity the full spectrum of animal and plant genetic material

command-and-control regulation laws that specify allowable quantities of pollution and that also may detail

which pollution-control technologies one must use

externality a market exchange that affects a third party who is outside or “external” to the exchange;

sometimes called a “spillover”

international externalities externalities that cross national borders and that a single nation acting alone

cannot resolve

market failure When the market on its own does not allocate resources efficiently in a way that balances

social costs and benefits; externalities are one example of a market failure
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