A negative externality exists whenever

Question

Quizplus · Accepted Answer

A negative externality occurs when the production or consumption of a good or service creates costs that are not reflected in the market price, i.e. an external cost. These costs are often borne by third parties, such as the environment or the public, leading to market inefficiencies and a misallocation of resources. Choices A, D, and E are incorrect because they do not consider externalities, while C describes a positive externality.

A Negative Externality Exists Whenever