An externality is
A. a problem intrinsic to public goods: The good or service is so costly that its provision generally does not depend on whether or not any single person pays.
B. the amount a consumer pays to consume an additional amount of a particular good.
C. the total cost to society of producing an additional unit of a good or service.
D. a cost or benefit resulting from some activity or transaction that is imposed or bestowed on parties outside the activity or transaction.
Answer: D
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At Rick’s Trailer Trove, Rick’s buddy Theodore convinces him to extend production of trailers beyond the current production level in order to gain more producer surplus. This strategy will work if ______.
a. current production exceeds the equilibrium point b. current production is at the equilibrium point c. the cost of the additional output exceeds what the buyers will pay for it d. the cost of the additional output is less than what the buyers will pay for it
Actual experiments show that negative income taxes destroy work incentives.
Answer the following statement true (T) or false (F)