Externalities:
A) are incidental by-products of some other economic activity or activities not taken into consideration by those engaged in that other economic activity.
B) make modeling economic growth more difficult because the assumption of perfect competition must be abandoned.
C) are the results of economic activity that have no noticeable costs or benefits.
D) occur very seldom in the real world.

Question

Quizplus · Accepted Answer

Externalities are by-products or spillover effects of economic activities that affect parties not involved in the activity, and are often not taken into consideration by those engaging in the activity. Examples of externalities include pollution from a factory affecting neighboring communities or a homeowner's landscaping improving the property value of neighboring houses.