Question

this is not an open - book exam.
question 33
1 pts
an externality is the uncompensated impact of
society’s decisions on the well - being of society
a person’s actions on that person’s well - being
society’s decisions on the poorest person in the society
one person’s actions on the well - being of a bystander.

Explanation:

To solve this, we recall the definition of an externality. An externality occurs when the actions of one party (a person or firm) affect the well - being of a third - party (bystander) without that third - party being compensated or paying for the impact. Let's analyze each option:

• Option 1: "society's decisions on the well - being of society" does not fit the definition of an externality as it is about society's decisions on itself, not an uncompensated impact of one's actions on a bystander.
• Option 2: "a person's actions on that person's well - being" is about self - impact, not an impact on a bystander, so it is not an externality.
• Option 3: "society's decisions on the poorest person in the society" is about society's decisions on a specific group within society, not the uncompensated impact of one's actions on a bystander.
• Option 4: "one person's actions on the well - being of a bystander" matches the definition of an externality as it is the uncompensated impact of one person's actions on a non - involved third - party (bystander).

Answer:

D. one person's actions on the well - being of a bystander.