External Benefit: An external benefit refers to the benefits received by third parties due to economic activities, such as education spillovers or vaccinations that prevent disease transmission.
Marginal Social Benefit (MSB): MSB represents both private benefits and external benefits associated with producing one additional unit of output. It includes all benefits enjoyed by society.
Coase Theorem: The Coase theorem states that if property rights are clearly defined and transaction costs are low, private bargaining can lead to an efficient resolution of externalities without government intervention.