An external cost of production is
A) a cost incurred by someone other than the producer.
B) the production cost borne by a producer.
C) the result of the sum of private and social cost.
D) another word for a tax.

Question

Quizplus · Accepted Answer

An external cost of production is a cost that is borne by someone other than the producer. It is also known as a negative externality, and it occurs when the production or consumption of a good or service imposes costs on third parties who are not involved in the transaction. Examples of external costs include pollution, traffic congestion, and noise pollution. Because these costs are not reflected in the market price of the good or service, they can lead to an inefficient allocation of resources and a suboptimal level of production.

An External Cost of Production Is