Which of the following is an example of an activity generating a negative externality?
A)You buy a new car, then discover it needs a new transmission.
B)Your next-door neighbor mows the lawn at 6 A.M.
C)The only two coffee shops in town conspire to raise prices.
D)After Jane bought health insurance, she began racing motorcycles on the weekends.

Question

Quizplus · Accepted Answer

Your neighbor mowing the lawn at 6 am can generate a negative externality by disturbing the peace and sleep of others living in the neighborhood. This activity imposes a cost on others without their consent or compensation. The other options do not involve externalities. A is an example of a private cost (the cost of repairing the car) but not an externality. C is an example of collusion or anti-competitive behavior, which does not involve externalities. D is an example of an individual choice that may involve risk-taking but does not generate external costs on others.

Which of the Following Is an Example of an Activity