An externality is said to exist when:
A)individuals impose costs or benefits on others but have no incentive to take these costs and benefits into account.
B)individuals impose costs or benefits on others,and the market provides incentives to take these costs and benefits into account.
C)individual actions are affected by external forces like the loss of U.S.jobs because of competition from abroad.
D)individual actions are affected by government policies (such as taxes)that are externally imposed on the market.

Question

Quizplus · Accepted Answer

An externality exists when an individual or firm's actions impose costs or benefits on others, but they have no incentive to consider these costs and benefits when making their decisions. This could lead to an inefficient allocation of resources in the market.

An Externality Is Said to Exist When