Which of the following would be an external cost associated with the production of coal-fired electricity?
A) the cost of misleading advertising
B) the increase in labor costs as the firm pays its workers who are adversely affected by the coal-fired technology
C) the pollution generated by the firm's physical plant
D) the decrease in value consumers attach to this kind of electricity
E) the value people derive from turning off lights when they leave the room, that is cost-saving

Question

Quizplus · Accepted Answer

External costs are costs that are not borne by the parties directly involved in a transaction or operation, such as the production of coal-fired electricity. Pollution generated by the firm's physical plant is an external cost because it affects third parties who are not part of the electricity production process, such as local communities and ecosystems, through air and water pollution.

Which of the Following Would Be an External Cost Associated