If an activity generates external costs, the decisionmakers generating the activity will:
A) be faced with its full costs.
B) be faced with no costs.
C) not be faced with its full costs.
D) be faced with excesive costs.

Question

Quizplus · Accepted Answer

If an activity generates external costs, decision makers will not be faced with its full costs. External costs are costs that are not directly borne by the decision makers or the market, but instead are passed on to third parties or society as a whole. These costs may include negative impacts on the environment, health, and quality of life, among other things. As a result, decision makers may not be motivated to address or reduce these costs because they do not directly bear the costs themselves.

If an Activity Generates External Costs, the Decisionmakers Generating the Activity