An externality occurs when
A) the costs of producing a good are paid entirely by the producer.
B) some of the costs of producing a good are paid by someone other than the producer.
C) the marginal social cost of an activity increases as that activity is increased.
D) Both answers A and C are correct.

Question

Quizplus · Accepted Answer

An externality occurs when some of the costs or benefits of producing or consuming a good or service are not reflected in the market price and are instead borne by third parties.

An Externality Occurs When