An externality is the impact of
A)society's decisions on the well-being of society.
B)a person's actions on that person's well-being.
C)one person's actions on the well-being of a bystander.
D)society's decisions on the poorest person in the society.

Question

Quizplus · Accepted Answer

An externality is the impact of one person's actions on the well-being of a bystander. The bystander may be negatively or positively affected by the action, but the point is that they are not directly involved in the decision-making process. This can lead to inefficiencies in the market or in society as a whole, as the external costs or benefits are not accounted for in the decision-making process.

An Externality Is the Impact of