Asked by Vritra Official on May 08, 2024
Verified
When a transaction between a buyer and seller directly affects a third party, the effect is called an externality.
Externality
A cost or benefit arising from an activity or transaction that affects an unrelated third party who did not choose to incur that cost or benefit.
- Gain an understanding of how externalities influence market efficiency.
Verified Answer
FS
Frank SchönherrMay 12, 2024
Final Answer :
True
Explanation :
An externality occurs when a transaction between a buyer and seller has a direct effect on a third party that is not involved in the transaction.
Learning Objectives
- Gain an understanding of how externalities influence market efficiency.