Question

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

a. A company investing in research and development to create new products
b. A factory polluting the air and water in the surrounding community
c. A company providing free training to its employees to increase their skills and knowledge
d. A farmer's market providing fresh produce to local consumers

Answer 1

A negative externality occurs when a third party incurs costs due to the actions of a producer or consumer. In this case, a factory polluting the air and water in the surrounding community is an example of a negative externality.

Step-by-step explanation:

A negative externality is a cost or impact on a third party that is not taken into account by the producer or consumer of a good or service. A negative externality occurs when a third party incurs costs due to the actions of a producer or consumer. In this case, a factory polluting the air and water in the surrounding community is an example of a negative externality.

In this case, the example of a negative externality is option b, where a factory polluting the air and water in the surrounding community imposes costs on the community without compensating them. This pollution harms the well-being of others and is not accounted for by the factory. It is important to address negative externalities to ensure the fair distribution of costs and benefits.