Pollution is an example of a ________ externality.
A) negative consumption
B) positive production
C) positive consumption
D) negative production
E) Coasian

Question

Quizplus · Accepted Answer

Pollution is a negative production externality because it is a cost imposed on society by firms in the process of production. The cost of pollution is not accounted for by the firm and therefore not reflected in the market price of the product which causes a misallocation of resources.

Pollution Is an Example of a ________ Externality