Question

An externality is:

Question 21 options:

	Always a benefit to the recipient.
	An activity that occurs in a business which is unknown to management.
	Unintended benefits or costs imposed on third parties as a result of economic activity.
	Always a detriment to the recipient.

Answer 1

If wetalk in simple terms then externality is the situation that arises when there is transaction between first two parties and the positive or the negative effect can be seen on the third party

for example if a person is driving a petrol car then the pollution caused by it will harm the person standing nearby him in that way which is also called negative externality

The other type of externality is positive externality which causes positive effect on the third-party

so the correct answer here is option C