Asked by Rajbeer Sandhu on Jul 15, 2024
Verified
You are unable to sleep because your hotel room is right underneath the noisy air conditioning system. We would classify this situation as an
A) internal cost.
B) internal benefit.
C) external cost.
D) external benefit.
External Cost
Costs that are not borne by the producer or consumer, but by a third party or the environment, such as pollution.
Air Conditioning
A system for controlling the humidity, ventilation, and temperature in a building or vehicle to provide a comfortable indoor environment.
- Understand the critical nature of externalities and their consequences on market performance.
- Identify the distinctions between internal and external costs and benefits.
Verified Answer
MB
Mukul BagariaJul 15, 2024
Final Answer :
C
Explanation :
The noise from the air conditioning system is an external cost because it is an unwanted consequence experienced by an individual not directly involved in the decision to install the system in that location.
Learning Objectives
- Understand the critical nature of externalities and their consequences on market performance.
- Identify the distinctions between internal and external costs and benefits.