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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.
Period costs include all costs except direct costs incurred on the product. Such costs usually occur either after the manufacturing stage, or outside the factory. The two common examples of period costs are marketing and selling costs, and administrative costs. 1  slide 1 of 3. Marketing & Selling Costs Marketing and selling costs are the costs incurred by the company to secure orders and transfer the finished product or service to the customer. 2  slide 2 of 3.