Asked by Alicia Gregory on Jul 22, 2024
Verified
An externality exists when the cost or benefit resulting from some activity or transaction is experienced by parties external to the activity or transaction.
Externality
An economic term referring to a cost or benefit that affects a party who did not choose to incur that cost or benefit, often leading to market failure.
External
Pertaining to elements or influences originating outside a system or entity.
- Determine the essential role of externalities and how they influence market efficacy.
Verified Answer
TD
Travis DavisJul 22, 2024
Final Answer :
True
Explanation :
An externality occurs when a third party not directly involved in an activity or transaction experiences costs or benefits as a result of that activity or transaction, without these being reflected in market prices.
Learning Objectives
- Determine the essential role of externalities and how they influence market efficacy.