An externality is:
A) always a benefit to the recipient.
B) always a detriment to the recipient.
C) an activity that occurs in a business which is unknown to management.
D) unintended benefits or costs imposed on third parties as a result of economic activity.
E) an act, caused by a firm located in this country, which has an effect on a person in a foreign country.

Question

Quizplus · Accepted Answer

An externality is an unintended benefit or cost imposed on third parties as a result of economic activity. It can be either positive or negative and is not necessarily a benefit or detriment to the recipient. It is also not necessarily unknown to management and is not limited to actions by firms in a particular country.

An Externality Is