Question

The third-party problem: a. occurs when a market activity leads to a negative externality.b. occurs when a market activity leads to a positive externality.c. occurs when a market activity leads to a negative or a positive externality.d. is the same as the free-rider problem.e. is associated with the production of private goods but not public goods.

Answer 1

Answer:

The correct answer is letter "C": occurs when a market activity leads to a negative or a positive externality.

Explanation:

An Economic Externality is a cost or benefit paid or earned by a third party that does not have control over the factors that produced the cost or benefit. The third-party problem arises when whether negative or positive externalities affect individuals who are not involved in market activities.