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Divergence between Private and Social Costs
A divergence between private and social costs arises when an economic activity imposes costs on third parties that are not accounted for by the producer or consumer. Private costs are the direct expenses borne by the decision-maker, such as a firm's outlay for labor and materials. Social costs represent the total cost to society, which includes these private costs plus any additional external costs, like the public health impact of pollution. The presence of such external costs means the social cost of an activity exceeds its private cost, which can lead to an inefficiently high level of production from a societal perspective.
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Economics
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The Economy 2.0 Microeconomics @ CORE Econ
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