When Jacob pays $5000 to paint his house because pollution from a nearby factory damaged the paint. The cost of $5000 is an external cost to the factory. Therefore, the option B holds true.
An external cost can be referred to or considered as the cost that is derived by the company due to the external factors, completely out of the control of a company.
When Jacob had to bear a cost of $5,000 for painting his house, which was polluted from a nearby factory, the nearby factory is an external factor, and thus, the cost associated with it will also be external.
Therefore, the option B holds true and states regarding the significance of external costs.
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The question seems to be incomplete. It has been added below for better reference.
Jacob pays $5000 to paint his house because pollution from a nearby factory damaged the paint. to the factory, the $5000 cost is:_______
A. Internal Cost
B. External Cost
C. Private Cost
D. None of the above
