Which of the following is an example of a negative externality?
A)Bad weather reduces the size of the wheat crop.
B)A reduction in the size of the wheat crop causes the income of wheat farmers to fall.
C)Smoking harms the health of nonsmokers who are nearby.
D)Smoking harms the health of the smoker.
E)all of the above

Question

Quizplus · Accepted Answer

A negative externality occurs when the actions of an individual or firm have harmful effects on others that are not reflected in the market price of goods or services. Choice C, "Smoking harms the health of nonsmokers who are nearby," is an example of a negative externality because the smoker's action has a harmful impact on the health of bystanders, which is not accounted for in the price of cigarettes or in any transaction between the smoker and the nonsmokers.

Which of the Following Is an Example of a Negative