The term externalities refers to
A)Only positive benefits of a market activity borne by a third party.
B)Only negative costs of a market activity borne by a third party.
C)The negative costs and positive benefits of a market activity borne by a third party.
D)None of the choices are correct.

Question

Quizplus · Accepted Answer

Externalities refer to the costs or benefits of a market activity that are borne by a third party, who is not directly involved in the transaction. These externalities can be both positive (benefits) and negative (costs). For example, the pollution caused by a factory is a negative externality that is borne by those who live near the factory and breathe the polluted air. On the other hand, the education of a person can be seen as a positive externality, as the benefits of their education may also be enjoyed by their community or society as a whole.

The Term Externalities Refers to