The unwanted loud music is a negative externality of production, similar to pollution of the water or the air by manufacturing firms. Exernatlity means that there is a cost to someone that they did not ask for or pay for. Although this example is a negative externality, externalities can also be positive. Enjoyment of other people's gardens or holiday decorations would be an example. In those instances, someone gets a benefit that they did not ask for or pay for.