Manufacturing externalities refer to a side effect of an industrial operation, such as a chemical company leaking improperly stored chemicals into the groundwater.
Externalities of production can be measured in terms of the difference between the actual cost of producing a good and the real cost to society as a whole.
The impact of external factors of production can be positive, negative or combined.
A positive production externality is the positive effect that an activity has on an unrelated third party; a negative externality is the negative impact that an activity has on the same thing.