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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.
Labour on=costs would include travel time, holiday pay, training costs, working clothes, social insurance, taxes on employment &c. Path cost is a term in networking to define the worthiness of a path, see Routing.rivate costs are the costs that the buyer of a good or service pays the seller. This can also be described as the costs internal to the firm's production function. External costs (also called externalities), in contrast, are the costs that people other than the buyer are forced to pay as a result of the transaction.