An externality is
A)the amount by which price exceeds marginal private cost.
B)the amount by which price exceeds marginal social cost.
C)the effect of government regulation on market price and output.
D)someone who consumes a good without paying for it.
E)a cost or benefit that arises from an activity but affects people not part of the original activity.

Question

Quizplus · Accepted Answer

An externality is a cost or benefit that arises from an activity but affects people not part of the original activity. It is an unintended (positive or negative) consequence of economic activity that affects someone who is not directly involved in the production or consumption of a good or service. Examples of negative externalities include pollution from a factory, while positive externalities include education, which benefits society as a whole.

An Externality Is