An Externality Is

question 26

Multiple Choice

An externality is

• A) the benefit that accrues to the buyer in a market.
• B) the cost that accrues to the seller in a market.
• C) the unanticipated effect on a business of a decision that it makes
• D) the compensation paid to a firm's external consultants.
• E) the uncompensated impact of one person's actions on the well-being of a bystander.

---

Definitions:

Opposite Directions

A term indicating movements or trends that are diametrically contrary to each other in a physical or metaphorical sense.

Upward Sloping

A term often used to describe a line on a graph that shows an increase in a variable as another variable increases, indicative of a direct relationship.

Positively Related

A term describing the relationship between two variables where they move in the same direction; when one increases, the other also increases, and vice versa.

Omitted Variable Bias

Omitted Variable Bias occurs in statistical models when a relevant variable is left out of the model, potentially leading to incorrect conclusions about the relationship between the variables of interest.