What is an example of an externality?
A) the impact of bad weather on the income of ski hill owners
B) the impact of government spending on employment insurance on the people that are unemployed
C) the impact of pollution from a power plant on the health of people in the vicinity of the power plant
D) the impact of increases in health care costs on the health of individuals in society

Question

Quizplus · Accepted Answer

An externality is a cost or benefit that affects a third party who did not choose to incur that cost or benefit. Pollution from a power plant is an example of a negative externality because it imposes costs on people in the vicinity of the plant who are not responsible for its pollution. The other options are either not examples of externality or do not fit the definition of externality.

What Is an Example of an Externality