Question

What is an externality?

a side effect of a good or service generating benefits or costs to someone who doesn’t decide how much to produce or consume

someone who would choose to pay for a certain good or service but does not get the benefits of it if provided as a public good

someone who wouldn’t choose to pay for a certain good or service but who’d get the benefits of it anyway if provided as a public good

a shared good or service for which it would be impractical to make consumers pay individually and to exclude nonpayers

Answer 1

a side effect of a good or service generating benefits or costs to someone who doesn’t decide how much to produce or consume

Step-by-step explanation:

Externality is a microeconomic concept that aims to explain the positive or negative impact that an economic activity has on third parties. If by exercising an economic activity, a company indirectly benefits society or community, the externality is positive. If economic activity negatively impacts the surrounding community, externality is said to be negative. For example, the pollution that an industry emits in the production process has deleterious effects throughout society, being a negative externality. Likewise, a truck causes potholes in the road, this is a negative externality, since all citizens' taxes, including most non-truckers, will be used to restore potholes in the roadway.