An Externality Is Defined as

question 204

Multiple Choice

An externality is defined as

• A)an opportunity cost that is not considered, which causes inefficiency.
• B)a social cost that affects parties external to a transaction.
• C)a transaction which imposes a loss on one of the parties involved.
• D)a "cost of doing business" that cannot be allocated to any particular good.
• E)the increase in cost associated with increased production.

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Definitions:

Decision Alternatives

The different options or courses of action available to decision-makers.

Potential Value

The future worth or usefulness that something holds, not currently realized but that could be achieved under certain conditions.

Maximum Possible Gain

The highest achievable outcome or benefit from a specific action or set of actions in a given scenario.

Bounded Rationality

The concept that decision-making is limited by the information available, the cognitive limitations of the mind, and the time available to make the decision.