An Externality Can Best Be Defined as

question 289

Multiple Choice

An externality can best be defined as

• A) a party not directly involved in a transaction.
• B) a consequence of a transaction that spills over to affect third parties.
• C) a right of an owner to use and exchange property.
• D) a cost associated with the production of one more unit of output.

---

Definitions:

Dominant Firm

A company that has a major share of the market for a particular product or service, often able to influence market conditions.

Competitive Fringe

Small, less dominant firms in a market that compete at the periphery with the larger dominant firms, often by focusing on niche segments.

Price Leader

A company that has a dominant market share and can influence the pricing policies of competitors within the industry.

Dominant Firm Model

A market structure where one firm has a large market share and sets prices, while other smaller firms follow its pricing strategy.