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.

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Definitions:

Minimum

The lowest allowable or possible amount, level, or number in a given set of circumstances.

Allocative Efficiency

Refers to a state in which resources are distributed in a way that maximizes the net benefit to society, ensuring that goods and services are produced at the right quantities to meet consumer preferences.

Long-run Equilibrium

A state in which all factors of production are optimally distributed meeting the demands of consumers; also, a point where economic forces such as supply and demand are balanced.

Marginal Cost

The change in total cost that arises when the quantity produced is incremented by one unit.