An externality is ?
Correct answer: E. The uncompensated impact of one person's actions on the well-being of a bystander
- A. the benefit that accrues to the buyer in a market
- B. the cost that accrues to the seller in a market
- C. none of these answers
- D. the compensation paid to a firm's external consultants.
- E. The uncompensated impact of one person's actions on the well-being of a bystander
Explanation
An externality is an uncompensated benefit or cost imposed by one person's actions on an uninvolved third party. It is not simply the buyer's benefit or the seller's cost within the market transaction.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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