A-LevelEconomicsBasic economic ideas and resource allocation9708/12 · May/June 2015 · Q141 Mark
What is an example of an externality?
AProduction of good X directly affects the cost of producing good Y.
BThe entry of a new firm reduces the profits of existing firms producing good X.
CThe introduction of bus-only lanes reduces the travel times of bus passengers.
DThe opening of a new underground railway reduces the revenue of bus operators.
✓ Correct answer
A: Production of good X directly affects the cost of producing good Y.
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