Suppose California adopts environmental rules that permit manufacturers to emit more pollutants into the air, which affects air quality in Nevada and other neighboring states. This is an example of a/an ________.

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This scenario describes a negative externality, where one person's actions (in this case, California's lax environmental regulations) have a negative impact on others (in this case, neighboring states' air quality). This is a classic example of a negative externality in which the cost of the pollution is not borne by the polluter but by society as a whole.

Suppose California Adopts Environmental Rules That Permit Manufacturers to Emit