A plausible example of market failure due to an externality is

Question

Quizplus · Accepted Answer

The despoiling of rivers and lakes by nitrogen run-off from agricultural fertilizers is an example of market failure due to an externality. The costs of the pollution are not borne by the farmers who use the fertilizers but are instead passed on to society in the form of degraded environments, loss of biodiversity, and harm to human health. This is an example of a negative externality, where the actions of one party (the farmer) impose costs on others (the public) that are not reflected in the market price of the product (the food produced by the farmer).

A Plausible Example of Market Failure Due to an Externality