Question

Which is not an example of an externality

Answer 1

Answer:

D.

Explanation:

Externality

This is a result of industrial or commercial activity which affects other parties without this being reflected in market prices. It is used to refer to the cost or benefit received by a third party. In a externality situation, the third party has no control over the creation of the cost or benefits.

Roads maintained with tax on gasoline has no externality. This is because the tax is imposed on the road users through tax. There is no third party benefiting or incurring cost from the maintenance of of road with tax on gasoline.

Apart from the other options which are good examples of externality, a common one used to explain the term is a person smoking cigarette, which can create passive smoking for those around.