An externality is defined as
A)an additional cost imposed by the government on producers.
B)an additional gain received by consumers from decisions made by the government.
C)a cost or benefit that arises from production and falls on someone other than the producer, or a cost or benefit that arises from consumption and falls on someone other than the consumer.
D)a marginal social cost.
E)the additional amount consumers have to pay to consume an additional amount of a good or service.

Question

Quizplus · Accepted Answer

An externality is a cost or benefit that affects a party who did not choose to incur that cost or benefit. This can arise from production or consumption activities and falls on someone other than the producer or consumer. A classic example of a negative externality is pollution caused by a factory, which affects the environment and people living nearby but may not be fully reflected in the cost of production. On the other hand, a positive externality could be education, which benefits individuals and society as a whole in the long run.

An Externality Is Defined as