The concept of externalities refers to
A) the internalized cost of producing.
B) a situation where actual benefits or costs are not reflected in the market price of the good.
C) the difficulty in determining actual polluters.
D) None of the above.

Question

Quizplus · Accepted Answer

Externalities refer to situations where actual benefits or costs are not reflected in the market price of a good. This occurs when the production or consumption of a good or service affects third parties who are not directly involved in the transaction. For example, pollution from a factory may have negative effects on the health and well-being of nearby residents, but these costs are not factored into the price of the goods being produced.

The Concept of Externalities Refers to