Final answer:
The activity most likely to produce an externality is a student having a party in her room in the student hall of residence, which can impact neighbors and is thus a negative or positive externality depending on the context.
Step-by-step explanation:
The activity most likely to produce an externality is the student having a party in her room in the student hall of residence. This activity impacts others who are not directly involved in the party, such as neighboring students who might experience noise or disturbances. Externalities are outcomes of economic activities that affect third parties who are not directly involved in the activity.
An externality can be negative or positive, depending on its impact on the third parties. The noise from the party is a negative externality if it disrupts other residents' study time or sleep. In contrast, if the neighbors enjoy the lively atmosphere the party creates, it might be considered a positive externality. Externalities like these are important considerations in economic policy and urban planning, as they influence how actions within a community affect the overall welfare of its members.