Asked by Cynthia Aborn on May 05, 2024
Verified
Which of the following is NOT an example of an externality?
A) The development of a vaccine for preventing flu.
B) Acid rain that destroys forest land throughout the Midwest.
C) Gas prices that doubled between 1998 and 1999.
D) A factory that dumps dangerous chemicals into the Hudson River.
Externality
A consequence of an economic activity, such as pollution, that affects third parties.
Acid Rain
Precipitation that contains a high concentration of sulfuric or nitric acids, often resulting from the emission of sulfur dioxide and nitrogen oxides from industrial activity.
Gas Prices
represent the cost per unit volume of gasoline, a widely monitored economic indicator due to its implications on consumer spending and economic health.
- Understand the economic implications of external costs and benefits and how they relate to market efficiency and failure.
Verified Answer
JS
Janvi SharmaMay 09, 2024
Final Answer :
C
Explanation :
Externality refers to a cost or benefit that affects a party who did not choose to incur that cost or benefit. Choices A, B, and D are examples of externalities because they involve costs or benefits to third parties not directly involved in the transaction. Choice C, the doubling of gas prices, is not an externality but rather a market price fluctuation that directly affects buyers and sellers in the market without involving third-party costs or benefits.
Learning Objectives
- Understand the economic implications of external costs and benefits and how they relate to market efficiency and failure.