When there is a cost or benefit that affects someone other than the seller and buyer,then there is
A) a tax.
B) a subsidy.
C) a quantity regulation.
D) a price regulation.
E) an externality.

Question

Quizplus · Accepted Answer

An externality is a situation where the actions of one party have an impact, positive or negative, on a third-party who is not part of the transaction. This impact is not reflected in the market price, leading to market failure. Examples of externalities include pollution or noise from a factory, or the positive benefits from someone getting vaccinated.

When There Is a Cost or Benefit That Affects Someone