Which of the following illustrates the concept of external cost?
A) Margaret purchases all her food and clothing in the big city outside her residence.
B) A small business owner frequently buys raw materials by using her bank's line of credit.
C) Raymond cannot open his windows at times because he lives downwind from a mushroom farm.
D) Felicia, an economics major, asks the most insightful questions in class.

Question

Quizplus · Accepted Answer

The fact that Raymond cannot open his windows due to the unpleasant odor from the nearby mushroom farm is an example of external cost. The business of the mushroom farm is causing discomfort and inconvenience to Raymond, who is not a part of the transaction between the farm and its customers.

Which of the Following Illustrates the Concept of External Cost