An external cost of an activity is one that is
A) borne by those not directly involved in the activity.
B) borne only by those directly involved in the activity.
C) included in the private marginal cost curve.
D) present only if the activity yields pollution.
E) transferred from consumers to producers.

Question

Quizplus · Accepted Answer

An external cost is a cost that is not accounted for in the market price of a good or service and is instead borne by individuals or groups not directly involved in the production or consumption of the good or service. Therefore, option A is the correct answer as it best describes the definition of an external cost.

An External Cost of an Activity Is One That Is