The price of pie increases.Some people who purchased pie before the price increase no longer purchase pie.This is
A) a positive externality.
B) a negative externality.
C) a positive externality for some consumers and a negative externality for others.
D) not an externality.

Question

Quizplus · Accepted Answer

This situation describes a direct effect of a price increase on consumers' purchasing behavior, not an indirect effect on third parties, which is what externalities refer to. Externalities are costs or benefits incurred or received by others who are not directly involved in the transaction.

The Price of Pie Increases