Externalities Exist When the Actions of One Agent

question 21

Multiple Choice

Externalities exist when the actions of one agent:

• A) benefit or hurt another agent who is not part of the exchange relationship.
• B) hurts the agent committing the action
• C) benefits the agent committing the action
• D) benefit or hurt another agent who is a part of the exchange relationship

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Definitions:

Consumption

The use of goods and services by households, contributing to their living standards and economic activity.

Midpoint Formula

A method used in economics and statistics to calculate the elasticity of a variable, or the percentage change in one variable in response to a percentage change in another.

Price Elasticity

A measure of how much the quantity demanded or supplied of a good changes in response to a change in its price, indicating sensitivity to price changes.

Quantity Demanded

The entire quantity of a product or service that buyers are prepared and have the capacity to buy at a given price point.