Question

Which of the following is an example of a negative externality?

O Jason pays $20 for an hour's worth of statistics tutoring but fails the test anyway.
O Mel turns up the volume of his stereo to full blast, annoying his neighbors.
O Sheila buys a new sweater, then has to return it to the store after discovering a hole in the sleeve.
O Lance lives by a bakery and every morning enjoys the smell of freshly baked bread.
O Min wants to withdraw money from an ATM machine but finds a sign saying the machine is temporarily out of orde

Answer 1

The negative externality is Mel playing loud music, which affects his neighbors. Pollution is another common negative externality. The birdhouse scenario is a positive externality.

Step-by-step explanation:

The example of a negative externality from the choices provided is: Mel turns up the volume of his stereo to full blast, annoying his neighbors. A negative externality occurs when a person or an entity's action has harmful effects on an unrelated third party. In this case, Mel's action of playing loud music impacts his neighbors' peaceful enjoyment of their homes without compensation.

Pollution is another common example of a negative externality because it affects the health and environment of people who are not involved in the polluting activity.

Self-Check Question:

In the self-check question, if you are a birder and your neighbor's actions of putting up birdhouses and planting trees attract birds, this is an example of a positive externality. Your neighbor's gardening and birdhouse activities benefit you, a third party, by enhancing your bird-watching experience without cost to you.