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 Canadian 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 occurs when the actions of one person or group affect the well-being of another person or group, but those affected parties have no control over the actions of the initial person or group. In other words, people impose costs or benefits on others without taking into account these effects. Example of negative externalities are pollution from a factory and traffic congestion caused by a busy road. Example of positive externalities include education, healthcare, and vaccination.

An Externality Is Said to Exist When