Question

question 4 (2 points) which of the following describes an externality? a) a cost or benefit incurred by a third - party who is not involved in the economic transaction b) a tax imposed on producers c) a subsidy given to consumers

Explanation:

An externality is defined as a cost or benefit that affects a third - party who is not involved in the economic transaction. A tax imposed on producers affects producers and consumers directly, and a subsidy given to consumers affects consumers and producers directly. But a cost or benefit to a non - involved third - party is an externality.

Answer:

a) A cost or benefit incurred by a third party who is not involved in the economic transaction