Which of the following activities represents an external cost?
A) the increase in local property values when the city creates a neighbourhood park
B) the price you pay for the prime ribs that you consume at a local restaurant
C) the reduction in the incidence of chicken pox when children are inoculated against the disease
D) the damage to a person's health from second-hand smoke

Question

Quizplus · Accepted Answer

The damage to a person's health from second-hand smoke represents an external cost. This is because the person who is exposed to the second-hand smoke (the third party) experiences negative effects without any compensation or payment from the smoker (the first party).

Which of the Following Activities Represents an External Cost