Which of the following does NOT contain an externality?
A) I sell you an ice cream and you drip it all over the person sitting next to you.
B) I sell you an ice cream and it gives you a headache.
C) I sell you an ice cream and you share it with your friend.
D) I give you an ice cream and you share it with a friend.

Question

Quizplus · Accepted Answer

An externality occurs when a third party is affected by a transaction they are not involved in. In option B, the headache affects only the buyer, not a third party.

Which of the Following Does NOT Contain an Externality