Business Finance
Economics-Externality.....

Question Description

What is an externality? Provide at least 2 examples(one positive and one negative)

Final Answer

An externality is the cost or benefit which affects a party who did not choose to incur that cost or benefit. 

Externalities can cause market failure if the price mechanism does not take into account the full social costs and social benefits of production and consumption.

Positive externalities are benefits that are infeasible to charge to provide; negative externalities are costs that are infeasible to charge to not provide.

whgrab (11399)
UT Austin

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