What can cause externalities?
A)a cost of a transaction that is borne by the government
B)a benefit of a transaction that is enjoyed by firms
C)lack of property rights to some resources
D)a cost or benefit that arises when market price changes
E)the revenue generated by a firm

Question

Quizplus · Accepted Answer

Externalities can be caused by a lack of property rights to some resources, which can result in the overuse or underuse of those resources, leading to negative effects on society as a whole.

Answer: D
 Externalities can also arise when market price changes, leading to costs or benefits that are not reflected in the market price and impacting third parties.

Therefore, the best choices are C and D.

What Can Cause Externalities