Which of the following illustrates the concept of a negative externality?
A)Bad weather reduces the size of the wheat crop.
B)A reduction in the size of the wheat crop causes income of wheat farmers to fall.
C)Smoking harms the health of the smoker.
D)Smoking harms the health of nearby nonsmokers.
E)Public health services reduce the transmission of disease.

Question

Quizplus · Accepted Answer

A negative externality occurs when the production or consumption of a good or service results in a cost to a third party not involved in the transaction. In this case, smoking harms the health of nearby nonsmokers who are not directly involved in the decision to smoke.

Which of the Following Illustrates the Concept of a Negative