Hi -

One example is a public park used by someone from another place.  For example, if I am a resident/taxpayer of County Blue and go use a public park in County Green, I have received a benefit from the taxpayers of County Green at no cost to me.   One way to think of it is that it something that people can derive benefit from at no cost.  (Especially if access is hard to control or unfeasible to charge for.) 

An example of a spillover cost would be if an industrial plant puts chemicals into the water supply, and the treatment cost is paid for by customers of the water utility.  The buyers of the water did not cause the pollution, but are having to pay indirectly for its remediation.

In both cases, the end user is either getting a benefit or paying a cost that he/she did not directly have a part in.  There is some information on wikipedia also (search on "externalities") but that is the way I think of it.

Hope this is helpful!

Amy A

AUD 2/22 79

BEC 4/26 - waiting!!!

A more unconventional example (explained by the Freakonomists):

Positive Externality:

Using Lojack to protect your car from theft.  In addition to alerting the authorities as to where your car is in the event of a theft, it sends a message out to all criminals that there's a certain chance that the car that they try to steal has Lojack, but they'll never know which one, so it benefits all motorists relatively equally.

Negative Externality:

Using the Club to protect your car. It's visible to the outside world, so it basically says "don't steal our car, steal the car next to ours that doesn't have the club."