Which of the following does NOT provide an example of an externality?
A) the view that passers-by and neighbours enjoy when observing your rose garden
B) the pleasure you get from purchasing a new pair of shoes
C) the air pollution generated when you drive your car
D) the free concerts neighbours hear when an accomplished musician practices at home

Question

Quizplus · Accepted Answer

An externality is an unintended side effect of an economic transaction that affects an uninvolved third party. Option B does not involve any third party and is a private benefit. The other options involve external effects on others.

Which of the Following Does NOT Provide an Example of an Externality