ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The uncompensated impact of one person’s actions on the well-being of a bystander.
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An uncompensated cost that an individual or firm imposes on others.
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A benefit that an individual or firm confers on others without receiving compensation.
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None of the above
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Detailed explanation-1: -External costs (also known as externalities) refer to the economic concept of uncompensated social or environmental effects. For example, when people buy fuel for a car, they pay for the production of that fuel (an internal cost), but not for the costs of burning that fuel, such as air pollution.
Detailed explanation-2: -An external cost is an uncompensated cost that an individual or firm imposes on others.
Detailed explanation-3: -In economics, there are four different types of externalities: positive consumption and positive production, and negative consumption and negative production externalities. As implied by their names, positive externalities generally have a positive effect, while negative ones have the opposite impact.
Detailed explanation-4: -In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party’s (or parties’) activity. Externalities can be considered as unpriced goods involved in either consumer or producer market transactions.
Detailed explanation-5: -Greater congestion and slower journey times for other drivers. Cause of death for pedestrians, cyclists and other road users. Pollution, health-related problems. Noise pollution.