An external effect that generates costs to a third party is called
A) free-ridership
B) a positive externality
C) a negative externality
D) a marginal private cost

Question

Quizplus · Accepted Answer

A negative externality is an external cost imposed on a third party due to the actions of an economic agent. This effect generates costs that are not borne by the agent responsible for the externality, but by others who are not directly involved in the original transaction. Examples of negative externalities include pollution, traffic congestion, and noise pollution.

An External Effect That Generates Costs to a Third Party