A situation in where the costs of an action are not fully borne by the two parties engaged in exchange is

Question

Quizplus · Accepted Answer

An externality occurs when the costs or benefits of an action are not fully borne by the parties involved in the exchange. This can result in a negative or positive impact on third parties, who are not involved in the transaction, and may lead to distortions in the market. Examples of externalities include pollution, traffic congestion, and noise from construction sites.

A Situation in Where the Costs of an Action Are