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Spillover benefits are called positive externalities because they represent the positive effects of an economic activity that are not reflected in the market price and are enjoyed by third parties who did not directly participate in the transaction. For example, when a company invests in a clean energy project, the surrounding community may benefit from improved air quality and increased local jobs, even though they did not directly pay for the project. These benefits enhance overall social welfare but are often underprovided in a free market, leading to a potential justification for government intervention.

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4mo ago

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