An external cost, such as the cost generated by pollution, is
A) a cost paid by consumers of the product.
B) a cost paid by producers of the product.
C) a cost paid by a third party or by society at large.
D) not a true opportunity cost of production.

Question

Quizplus · Accepted Answer

An external cost is a cost that is not directly paid for by the producers or consumers of the product, but instead is borne by a third party or by society at large. In the case of pollution, for example, the cost of the harm done to the environment or to people's health is not directly paid by the producers or consumers of the product that causes the pollution, but instead is spread out to others who must bear the cost of cleaning up the environment or paying for medical treatment.

An External Cost, Such as the Cost Generated by Pollution