An externality is an example of
A)a corrective tax.
B)a tradable pollution permit.
C)a market failure.
D)Both a and b are correct.

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 result in a market failure, as the market may not take into account the full cost or benefit of a product or action, leading to inefficiencies. Corrective taxes and tradable pollution permits are policy solutions that can be used to address externalities and reduce the associated inefficiencies, but they are not examples of externalities themselves.

An Externality Is an Example of