An externality exists:

O when the government subsidizes a good.

O some of the benefits or costs associated with a good are borne by third parties.

O goods are sold in specific geographic locations.

O the government taxes a good.

The answer is B.

Explanation:

Externality exists when some of the benefits or costs associated with a good are borne by third parties.

Externality is happens when the activities of a firm or business (through consumption or production) affects the third party.

We have positive externality and negative externality. Positive externality are benefits that are borne by the third party. For example, A beekeeper who keeps bee for honey. The honey is beneficial to third party. Negative externality are hazards that are borne by third party. For example, a company through its activities generate pollution.