Question

An externality is

Answer 1

Solution:-

An externality is a cost or benefit that borne by a party who did not choose to incur that cost or benefit. There are both positive and negative externalities. For example, if a factory causes pollution in the air, the factory is not paying for it in any form to clean up the pollution, the cost is being borne by others who suffer from the pollution. This is a negative externality. On the other hand, take a lighthouse, ships don't pay the lighthouse for the benefit of light, however, they are dependent on it and this is a positive externality.