When a species of fish dies off due to pollution in a river where it once lived,this is an example of
A) a market failure caused by an externality.
B) a market failure caused by market power.
C) a market failure caused by equality.
D) There is no market failure in this case.

Question

Quizplus · Accepted Answer

The pollution of the river is an example of a negative externality, where the actions of one party (the polluter) affects the well-being of another party (the fish). This is a case of market failure caused by an externality, as the polluter is not bearing the full costs of their actions, and there is no market mechanism to account for the harm caused to the fish population.

When a Species of Fish Dies Off Due to Pollution