An externality is the one that has often unintended impact that an economic actor’s actions has on the well-being of another actor who stands by. We can divide externality into two as positive and negative. The best-known type of externality is the external cost (or negative externality). For example, the pollution generated as a byproduct during a production process is a negative externality. On the other hand, external benefits (or positive externalities), such as R&D (research and development) activities, lead to productivity-enhancing inventions. The correct answer is D.