A negative externality exists when:
A) a person engages in an activity that has a spillover that makes a bystander better off
B) the market has only one seller
C) a firm sells its product in an external foreign market
D) a person engages in an activity that has a spillover that makes a bystander worse off

Question

Quizplus · Accepted Answer

A negative externality occurs when an activity (such as production or consumption) has an impact on a third party that is detrimental or harmful, making bystanders worse off. For instance, the pollution caused by a factory affects the air quality and health of people living nearby, who did not choose to be exposed to such pollution.

A Negative Externality Exists When