An example of a negative externality created in the market system would be
A)poverty.
B)unemployment.
C)an increased number of bird flu patients.
D)water pollution.

Question

Quizplus · Accepted Answer

Water pollution is an example of a negative externality created in the market system because it is a cost borne by individuals who are not involved in the production or consumption of the good (in this case, clean water) but still suffer the consequences of its degradation. For example, a factory that dumps waste into a river may benefit from lower production costs, but this same act of pollution may harm downstream communities who rely on the river for drinking water, fishing, and recreation. These external costs are not reflected in the market price of the goods and services, and therefore may lead to an overproduction or overconsumption of polluting activities.

An Example of a Negative Externality Created in the Market