Question

Which of the following is an example of an externality? a. A paper mill dumps waste into the river. b. A neighbor’s loud music disrupts sleep. c. A drunk driver causes an accident that injures another person. d. All of them are correct

Answer 1

d. All of them are correct.

Step-by-step explanation:

An externality is a process or outcome in economics where the actions of an industrial or commercial company affect a third party without the third party asking for it. In simple terms, it can be described as a third party benefiting or getting affected by the activities of someone/ something else.

Such cases can be seen in the dumping of waste into the by a paper mill, which affects the river even though the river isn't part of the paper mill industry. Likewise, a drunk driver causing an accident and injuring another person and a neighbor's loud noise disrupting the sleep of the surrounding people are all types of externality. They are not directly involved in the events but are affected by the actions.

Thus, the correct answer is option d.