An example of an externality occurs when a chemical factory
A) is producing ethanol and dumps waste in a river upstream from a popular fishing spot.
B) produces fertilizers that do not help plants grow.
C) produces fertilizers that kill plants rather than feed them.
D) overworks its employees.

Question

Quizplus · Accepted Answer

An externality is a cost or benefit for a third party who did not agree to it. In option A, the chemical factory's waste dumping affects the fishing spot, impacting others who use the river, which is a negative externality.

An Example of an Externality Occurs When a Chemical Factory