Market failure in the form of externalities arises when
A) production costs are included in the prices of goods.
B) there are costs and/or benefits that result from a transaction and affect someone other than the parties involved in the transaction.
C) the benefits exceed the costs of consuming goods.
D) the market fails to achieve equilibrium.

Question

Quizplus · Accepted Answer

Externalities occur when production or consumption of a good or service results in costs or benefits to individuals or parties beyond those involved in the transaction, therefore leading to market failure.

Market Failure in the Form of Externalities Arises When