People that choose to live near airports must put up with the noise associated with aircrafts arriving and departing. Which of the following best describes how those people are compensated for the negative externality that they face?
A) They have been compensated for the externality by the airlines.
B) They have been compensated for the externality with easier access to the airport.
C) They have been compensated for the externality with lower housing costs.
D) They have been compensated for the externality by the government.

Question

Quizplus · Accepted Answer

People living near airports generally face a negative externality in the form of aircraft noise. However, they may choose to do so because of lower housing costs. Therefore, they are compensated for the externality with lower housing costs. The airlines, government or easier access to the airport may not necessarily compensate them for the externality in monetary terms.

People That Choose to Live near Airports Must Put Up