Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
A cost or benefit incurred by a third party not involved in a transaction
B
A direct payment made in a market transaction
C
A government-imposed tax on goods
D
An internal cost borne by the seller
Understanding the Answer
Let's break down why this is correct
Answer
An externality in economics is a situation where a person's or a company's actions affect others who are not involved in that action. This can be either positive or negative. For example, if a factory pollutes a river, the nearby community suffers from dirty water, which is a negative externality. On the other hand, if someone plants a beautiful garden that everyone can see and enjoy, that creates a positive externality because it benefits the neighborhood. Understanding externalities helps us see how our choices impact others and can guide us in making better decisions that consider the whole community.
Detailed Explanation
An externality happens when someone not involved in a deal feels the effects. Other options are incorrect because This option confuses externalities with direct payments; A tax is a fee the government charges on goods.
Key Concepts
externalities
Topic
Externalities in Economics
Difficulty
easy level question
Cognitive Level
understand
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