If a negative externality results from the production of chemicals, an external cost is imposed on parties not directly involved in the market for the chemicals.

Question

Quizplus · Accepted Answer

A negative externality occurs when the production or consumption of a good or service imposes costs on third parties who are not involved in the transaction. In the case of chemicals, the production of these substances may generate pollutants, which can harm the environment or the health of nearby residents. These costs are not reflected in the market price of the chemicals, so they are considered external costs that are borne by others.

If a Negative Externality Results from the Production of Chemicals