____ occurs whenever a third party receives or bears costs arising from an economic transaction in which the individual (or group)is not a direct participant.

Question

Quizplus · Accepted Answer

This is the common definition of externality, where a party not directly involved in an economic transaction bears the costs or receives benefits. Examples of externalities include air pollution from a factory affecting nearby residents, or a vaccine reducing the spread of disease to individuals who did not directly pay for the vaccine. A is incorrect because it refers to a broader concept of costs and benefits, not just those imposed on third parties. C and D are incorrect because they do not describe externalities. E is incorrect because one of the choices is the correct answer.

____ Occurs Whenever a Third Party Receives or Bears Costs