Which of the Following Is an Example of an Externality

question 117

Multiple Choice

Which of the following is an example of an externality?

• A)Drug abuse affecting David's health
• B)Sara taking a break from work
• C)A transaction between two parties, affecting them alone
• D)Tom's smoking affecting his roommate's health

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Definitions:

Expected Utility Maximizer

An economic concept referring to individuals or entities that make choices under uncertainty to maximize their expected level of satisfaction or utility.

Utility Function

Depicts how different combinations of goods or services generate levels of happiness or utility for a person or household.

Probability

A measure of the likelihood of a specific event or outcome occurring, expressed as a number between 0 and 1.

Expected Utility Function

A concept in economics that quantifies an individual's preference for different outcomes, accounting for risk and uncertainty.