Externalities affect the welfare of others not involved in the production or consumption of a good or service in ways that markets don't take into account.
Added by Sarah F.
Step 1
Positive externalities occur when the production or consumption of a good or service benefits a third party who is not directly involved in the transaction. Negative externalities, on the other hand, occur when the production or consumption of a good or service Show more…
Show all steps
Your feedback will help us improve your experience
James Kiss and 88 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
James K.
Give an example of a positive and negative externality. Explain why market outcomes are inefficient in the presence of these externalities.
Jennifer S.
An externality is Group of answer choices the total cost to society of producing an additional unit of a good or service. a problem intrinsic to public goods: The good or service is so costly that its provision generally does not depend on whether or not any single person pays. a cost or benefit resulting from some activity or transaction that is imposed or bestowed on parties outside the activity or transaction. the amount a consumer pays to consume an additional amount of a particular good.
Nick J.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD