One person's (or firm's)use of a resource that damages other people who cannot obtain proper compensation is called a(n)
A) private cost.
B) positive externality.
C) external diseconomy.
D) effluent fee.
E) compensated social cost.

Question

Quizplus · Accepted Answer

An external diseconomy occurs when a person or firm uses a resource that causes harm or damage to others and those affected cannot obtain proper compensation. This creates a negative externality because the cost of the harm is not included in the private cost of the person or firm using the resource. As a result, the social cost of the resource use is higher than the private cost, and this can lead to market failure.

One Person's (Or Firm's)use of a Resource That Damages Other