The use of chlorofluorocarbons in refrigerators and air conditioners is alleged to cause the destruction of the ozone layer that surrounds the earth.This layer protects humans from ultraviolet radiation, which causes skin cancer.Industry has been prohibited from using these substances in aerosol cans, but the government has been reluctant to ban their use altogether because of the serious economic consequences.Economists analyze such problems and refer to them as
A)issues of unfairness.
B)examples of excess abstraction.
C)externalities.
D)comparative advantage issues.
E)examples of trade-offs between output and equality.

Question

Quizplus · Accepted Answer

This scenario represents a classic example of externalities, which are costs or benefits that arise from economic activities that are not reflected in market prices. In this case, the use of chlorofluorocarbons has a negative externality (the destruction of the ozone layer) that is not accounted for by the market price of refrigerators and air conditioners. The government has to intervene to limit the use of these substances because the producer and consumer of the product don't face the full social cost of their actions.

The Use of Chlorofluorocarbons in Refrigerators and Air Conditioners Is