Negative externalities are created when
A) an increase in the price of butterfat drives up the price of ice cream.
B) a driver leaves his car in a parking space after the meter expires and receives a ticket.
C) a driver drives recklessly on a busy highway.
D) a driver pulls over to help a stranded motorist fix a flat tire.

Question

Quizplus · Accepted Answer

Negative externalities refer to the unintended costs incurred on third parties as a result of another party's actions. Reckless driving can lead to accidents and injuries for other drivers on the road, making it a prime example of a negative externality. Choices A, B, and D do not involve externalities or third-party effects.

Negative Externalities Are Created When