Suppose that Rebecca throws her cola bottle out of her car window and it smashes on the road. Jim drives over the broken glass and gets a flat tyre. Rebecca's cola consumption has resulted in:

Question

Quizplus · Accepted Answer

Rebecca's action has caused a negative externality by imposing a cost (in the form of a flat tire) on Jim, who was not a party to her cola consumption. This is an example of a market failure, as Rebecca did not bear the full costs of her action.

Suppose That Rebecca Throws Her Cola Bottle Out of Her