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The existence of external benefit and external cost leads to misallocation of resources. External cost For example, when drivers are not liable for the health damage of car exhaust, drivers will equate only marginal private cost with marginal benefit. But if drivers are forced to pay for the health damage of car exhaust, their marginal cost will go up by the amount of the external cost.
Joint Cost. Definition: A joint cost is an expenditure that benefits more than one product, and for which it is not possible to separate the contribution to each product.The accountant needs to determine a consistent method for allocating joint costs to products.oint Cost. Definition: A joint cost is an expenditure that benefits more than one product, and for which it is not possible to separate the contribution to each product.