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Why Does an External Cost Lead to Inefficient Overproduction

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Why does an external cost lead to inefficient overproduction?


Definitions:

Consideration

An essential element in contract law, referring to the exchange of something of value between parties as part of an agreement.

Simple Contract

A contract that is not formalized in writing but is made orally or by conduct, requiring only mutual agreement and consideration to be valid.

Security Interest

A legal claim or lien on collateral that secures the payment or performance of an obligation.

Secured Transactions

Financial transactions in which the borrower pledges collateral to ensure repayment of a loan.

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