Global warming, which causes unfavorable climatic changes due to the burning of fossil fuels, would be an example of a(n):
A)positive externality.
B)negative externality.
C)internalized externality.
D)Coase externality.

Question

Global warming, which causes unfavorable climatic changes due to the burning of fossil fuels, would be an example of a(n):
A)​positive externality.
B)​negative externality.
C)​internalized externality.
D)​Coase externality.

Quizplus · Accepted Answer

Global warming caused by the burning of fossil fuels generates a negative externality since its effects, such as extreme weather events and rising sea levels, affect individuals who are not parties to the transaction that generates the pollution. The negative externality is not internalized since the parties responsible for the pollution do not bear the full cost of their actions. Coase externality refers to situations where bargaining between the stakeholders can result in efficient outcomes. Positive externality generates benefits to third parties without any compensation or reward.

Global Warming, Which Causes Unfavorable Climatic Changes Due to the Burning