Dioxin emission that results from the production of paper is a good example of a negative externality because
A)self-interested paper firms are generally unaware of environmental regulations.
B)there are fines for producing too much dioxin.
C)self-interested paper producers will not consider the full cost of the dioxin pollution they create.
D)toxic emissions are the best example of an externality.

Question

Quizplus · Accepted Answer

A negative externality occurs when the production of a good or service imposes costs on a third party who is not involved in the transaction. In the case of dioxin emissions from paper production, the paper producers benefit from their operations and profits, but the cost of the pollution is borne by the wider community through health and environmental effects. Self-interested paper producers may not consider the full cost of the pollution they create, resulting in an inefficient allocation of resources.

Dioxin Emission That Results from the Production of Paper Is