Which of the following best describes an economic effect of European imperialism in Africa related to externalities?

• A. European imperialism resulted in only positive social benefits for African economies.
• B. Imperialism eliminated all externalities in African markets.
• C. The extraction of resources led to increased social costs for local populations, such as environmental degradation.
• D. The economic effects of imperialism were limited to increased trade with Europe, without any impact on social costs or benefits.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of externalities in microeconomics. Externalities occur when a third party is affected by the actions of others, leading to social costs or benefits that are not reflected in market prices.
2. Step 2: Identify the economic activities related to European imperialism in Africa, such as resource extraction, and consider their broader social impacts beyond direct market transactions.
3. Step 3: Analyze how resource extraction can create negative externalities, for example, environmental degradation or harm to local communities, which impose social costs not accounted for by the imperial powers or markets.
4. Step 4: Evaluate the given options by matching them against the concept of externalities, focusing on whether they acknowledge the presence of social costs or benefits beyond private gains.
5. Step 5: Conclude that the best description is the one recognizing increased social costs (negative externalities) due to resource extraction, as this aligns with the economic understanding of externalities caused by imperialism.