Question

Negative externalities that arise from the production of a gooda. cause an increase in the demand for the goodb. cause a decrease in the demand for the goodc. impose costs on third partiesd. bring private costs into equality with social costs

Answer 1

The correct answer is option c.

Step-by-step explanation:

Externalities refers to the situation in which costs or benefits arising from the activities of someone are incurred or received by the some other third party.

Externalities can be classified into two types, namely, positive and negative.

In case of negative externalities the cost arising from the activities of some person are incurred by a third party.

Negative externalities lead to market failure.