Unpriced by-products of production or consumption that impose costs on other consumers or firms are known as
A)negative externalities
B)effluent fees
C)pollution rights
D)positive externalities
E)moral hazards

Question

Quizplus · Accepted Answer

Negative externalities refer to the situation where the production or consumption of a good causes external costs to be imposed on third parties who are not involved in the transaction. These costs are not reflected in the price of the good, and the party responsible for the externality does not internalize these costs. As a result, the market fails to allocate resources efficiently, and the production or consumption of the good is higher than the socially optimal level. Examples of negative externalities include pollution, secondhand smoke, and noise.

Unpriced By-Products of Production or Consumption That Impose Costs on Other