An externality exists when some of the costs of producing a product affect people who are unable, within a market system, to influence how much of a product should be produced.

Question

Quizplus · Accepted Answer

This is the definition of an externality. It occurs when the costs or benefits of a good or service are not fully reflected in the market price, affecting parties outside of the transaction.

An Externality Exists When Some of the Costs of Producing