Final answer:
The art gallery's issue in the example is a lack of geographic selectivity, which hinders its ability to target local potential buyers as the advertising also reaches audiences in areas too distant to effectively engage with the sale.
Step-by-step explanation:
The art gallery from the small town is facing a challenge of geographic selectivity in its advertising outreach. The television station advertising the "outsider artist" sale reaches a wider area than intended, which includes northwest Georgia and northeast Alabama. This effectively dilutes the gallery's ability to specifically target the local market that it wants to invite to the event for hosting and purchasing local art pieces. Such a lack of geographic selectivity means that the art gallery may spend resources broadcasting to an audience that is unlikely to attend due to distance.
As seen in different contexts, such as a concert producer hosting an outdoor concert near residential areas, the occurrence or absence of consideration for externalities and geographic relevance can significantly impact third parties and the effectiveness of market transactions. In the gallery's case, it can also affect the audience size and sales potential at the event.