A coal-powered electrical generator that discharges smoke into the air and causes uncompensated costs and discomfort to residents of a town has a(n):
A)quasi-public good.
B)external cost.
C)external benefit.
D)specific tax.

Question

Quizplus · Accepted Answer

The scenario describes a negative externality, which is an uncompensated cost or discomfort imposed on a third party that is not reflected in the price of the good or service. In this case, the coal-powered electrical generator is causing harm to the residents of the town without paying for the cost of that harm. Therefore, the correct answer is B) external cost.

A Coal-Powered Electrical Generator That Discharges Smoke into the Air