An external cost is built into the market price of a good and thus paid by the consumers.

Question

Quizplus · Accepted Answer

External costs, such as the negative environmental or social impacts of producing a good, are not typically reflected in the market price paid by consumers. Instead, they are often borne by society at large or future generations. This is known as a market failure and can lead to an inefficient allocation of resources. Governments may intervene through regulation or taxation to address external costs and promote more sustainable production and consumption practices.

An External Cost Is Built into the Market Price of a Good