An example of negative externality is the costs faced by small businesses in a one-bank town if the local bank fails.

Question

Quizplus · Accepted Answer

The failure of a local bank can lead to negative externalities for small businesses in the town, such as difficulty accessing loans or losing deposits, which can impact their operations and financial stability. This is an example of a negative externality, as the costs are faced by parties who did not cause the bank's failure but are still affected by it.

An Example of Negative Externality Is the Costs Faced by Small