An external cost
A)is a marginal benefit.
B)results in underproduction.
C)is a payment from the government to a producer.
D)is a cost that affects someone other than the seller.
E)is a payment from a producer to the government.

Question

Quizplus · Accepted Answer

An external cost is a cost that affects someone other than the seller, such as pollution or noise. It is called an "external" cost because it is not reflected in the price of the good or service being sold, and therefore is not considered by the seller when making production decisions. This can lead to overproduction, as the seller is not taking into account the negative impact on others.

An External Cost