A negative externality
A)is an adverse impact on a bystander.
B)causes the product in a market to be under-produced.
C)is an adverse impact on market participants.
D)is present in markets where the good or service is undesirable for society.

Question

Quizplus · Accepted Answer

A negative externality is a cost, usually to society as a whole, that arises when a transaction between a buyer and a seller has an impact on a third party who is not part of the transaction. The impact is adverse, i.e., it harms the third party in some way, such as by polluting the air or water, creating noise, or causing congestion. Externalities can result in market failure, where the market fails to allocate resources efficiently, and the product is under-produced.

A Negative Externality