Which is an example of an external cost?
A) secondhand smoke
B) increased gas prices for drivers of SUVs
C) the cost you pay your plumber to install a new hot water heater
D) your high electric bill that results from leaving your lights on all night

Question

Quizplus · Accepted Answer

Secondhand smoke is an example of an external cost because it imposes a cost on others who are not directly involved in the smoking behavior. The health effects of secondhand smoke can be significant and can result in increased medical costs or lost productivity for society as a whole.

Answer: B
 Increased gas prices for drivers of SUVs is an example of an external cost because it imposes a cost on society due to the negative impacts of carbon emissions on the environment and public health. SUV drivers may not fully bear the cost of these externalities, leading to market inefficiencies.

Answer: D
 Your high electric bill resulting from leaving your lights on all night is not an example of an external cost because the cost is internalized and borne by the individual consumer. The cost is a direct result of the consumer's own behavior and not imposed on others.

Therefore, the correct answers are A and B.

Which Is an Example of an External Cost