Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Externalities can only be negative, such as pollution.
B
Positive externalities can lead to benefits for third parties, such as improved education outcomes.
C
Externalities impact market efficiency by affecting the costs and benefits to society.
D
Only producers are affected by externalities; consumers do not experience them.
E
Externalities can be graphically represented to analyze their effects on supply and demand.
Understanding the Answer
Let's break down why this is correct
Answer
Externalities are effects that occur when a person's actions impact others, either positively or negatively, without those affected paying or receiving compensation. For example, if a factory pollutes a river, the local community suffers from the dirty water, which is a negative externality. On the other hand, if someone plants a beautiful garden that everyone can enjoy, that is a positive externality. These situations show that externalities can affect people who are not directly involved in the activity. Understanding externalities helps us see the importance of considering the wider effects of our actions on others.
Detailed Explanation
Externalities can be both positive and negative. Other options are incorrect because Some think externalities are only bad, like pollution; This option suggests only positive effects.
Key Concepts
Externalities
Market Efficiency
Graphical Analysis
Topic
Externalities and Their Effects
Difficulty
easy level question
Cognitive Level
understand
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