When CSU sophomore Cody Clow and his housemates chose not to heed the city's ordinance against unreasonable noise and host a loud party at their off-campus residence last fall, they were confronted and ticketed by police. Fort Collins city code describes unreasonable noise as any sound that will "unreasonably interfere with the enjoyment of life or property." What is TRUE about this situation?
A) Marginal external costs are positive.
B) Marginal external costs are negative.
C) Marginal external benefits are positive.
D) Marginal external benefits are negative.

Question

Quizplus · Accepted Answer

The loud party creates a negative externality, as it imposes a cost on others (neighbors) who are not involved in the party. This means the marginal external costs are positive.

When CSU Sophomore Cody Clow and His Housemates Chose Not