In a class discussion, William was asked to give a concise definition of externality. Which of the following would he give?

Question

Quizplus · Accepted Answer

An externality is a cost or benefit that is not reflected in the market price of a good or service, but is instead imposed on or received by others beyond the producer and consumer. In this case, it refers to a private company cost that is imposed on the public at large. Option A is incorrect because it is too broad and doesn't specifically address the concept of externality. Option B is incorrect because it only refers to a negative effect and doesn't encompass positive externalities as well. Option C is incorrect because it is not related to the concept of externality.

In a Class Discussion, William Was Asked to Give a Concise