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External Costs
Costs that are not directly controlled or incurred by a “demander” in a market but are the consequences of an exchange. Frequently, these costs cannot easily be quantified, and the burden of these costs can be on individuals or society. An example of an external cost would be the loss of civil liberties and freedoms as a consequence of increased police surveillance; however, external costs can be positive. For example, the pollen, an allergen, is transformed into honey by bees; likewise, carbon is transformed into air by trees.