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The system of specifying that certain activities can only be carried on in particular areas. Some activities cause harmful extemalities, by emitting noise, smells, or dust, or by attracting heavy traffic. Zoning tries to minimize the harm done by such activities, by concentrating them where they do least damage, and separating them from residential, commercial, or amenity areas.
Reference: Oxford Press Dictonary of Economics, 5th edt.
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