What is an externality?
A)the impact of one person's actions on the well-being of a bystander
B)the impact of a person's actions on that person's well-being
C)the impact of society's decisions on the well-being of society
D)the impact of society's decisions on the well-being of one person in the society

Question

Quizplus · Accepted Answer

An externality occurs when the actions of one person or group affect the well-being of another person or group who is not involved in the original action. This impact can be positive or negative, and it is often not reflected in market prices. For example, pollution from a factory may harm nearby residents' health, which is a negative externality.

What Is an Externality