An externality is a private cost or benefit that results from the production or consumption of a good or service that is external to a market. refers to production or consumption that occurs outdoors. enhances market efficiency. is a benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service.

Answered: An externality is a private cost…

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter17: Externalities And The Environment

Section: Chapter Questions

Problem 1QFR

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An externality

		is a private cost or benefit that results from the production or consumption of a good or service that is external to a market.
		refers to production or consumption that occurs outdoors.
		enhances market efficiency.
		is a benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service.

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

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The externalities are the additional costs or benefits faced by the third party who is not involved in the economic transaction. When the impact is in the form of the additional benefits to the third person, it is known as the positive externalities and when the impact is in the form of increased costs, and then it is known as the negative externality. The positive externalities are being encouraged by the government whereas the negative externalities are considered to be bad and discouraged by the government.

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