A negative externality occurs when the purchase of a product

Question

Quizplus · Accepted Answer

A negative externality occurs when the consumption or production of a good or service causes harm to a third party who is not compensated for that harm. This harm can be in the form of pollution, noise, congestion, or other negative effects on the environment or individuals. The cost of the harm is not reflected in the market price of the good, which leads to overconsumption or oversupply of the good, causing a reduction in the well-being of individuals outside of the market.

A Negative Externality Occurs When the Purchase of a Product