A negative externality occurs when
A)costs of production are imposed on third parties.
B)costs of distribution are imposed on third parties.
C)benefits of the product are passed on to third parties.
D)both costs of distribution are imposed on third parties and benefits of the product are passed on to third parties.

Question

Quizplus · Accepted Answer

A negative externality occurs when the costs of production (or consumption) are imposed on third parties who are not involved in the transaction. This means that the production or consumption of a good or service has a negative impact on society as a whole, and the cost of that negative impact is not born by the producer or consumer, but by others.

A Negative Externality Occurs When