William Engages in an Activity That Influences the Well-Being of a Bystander

question 358

Multiple Choice

William engages in an activity that influences the well-being of a bystander. In which of the following instances does an externality arise?

• A)The impact of William's activity on the bystander is adverse, and William compensates the bystander accordingly.
• B)The impact of William's activity on the bystander is adverse, but William fails to compensate the bystander.
• C)The impact of William's activity on the bystander is beneficial and the bystander compensates William accordingly.
• D)Externalities arise in all of the above cases.

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