Which of the following is NOT an example of an externality?
A)A bread company emits a wonderful aroma in the air that makes people smile.
B)The neighbor's wind chimes interfere with your sleep.
C)A firm fires 500 people.
D)Cancer-causing chemicals are dumped into the drinking water supply of a city.

Question

Quizplus · Accepted Answer

An externality is an unintended consequence of an economic activity that affects third parties who are not part of the transaction. Options A, B, and D are all examples of externalities. However, firing 500 people is not an externality, as it does not affect any third party who is not part of the transaction. It is an internal decision made by the company.

Which of the Following Is NOT an Example of an Externality