Negative externality occurs when
A)the production of a good harms third parties.
B)the production of a good helps third parties.
C)a buyer is sold inferior and damaged merchandise.
D)the consumption of a good helps third parties.

Question

Quizplus · Accepted Answer

Negative externality occurs when the production or consumption of a good or service creates costs that are borne by individuals who are not involved in the transaction. In other words, the production of a good harms third parties. For example, air pollution from a factory can harm the health of nearby residents, who are not involved in the factory's production or consumption. Negative externalities are a market failure and cause inefficiencies in resource allocation.

Negative Externality Occurs When