Which example illustrates a negative externality?
A)high prices for necessities such as drinking water in the aftermath of a natural disaster
B)the risks to nonsmokers from second-hand smoke
C)the increased risk of a traffic accident to an individual who uses a cell phone while driving
D)unemployment in the steel industry caused by low prices of imported (external)steel

Question

Quizplus · Accepted Answer

Second-hand smoke poses a negative externality because individuals who do not smoke are still affected by the negative health effects of those who do smoke in their vicinity. This is an example of a negative externality where the actions of one individual (smoking) imposes costs on another individual (nonsmoker).

Which Example Illustrates a Negative Externality