Which of the following best describes a negative externality?
A)Your neighbor loves to bake bread and always brings you a loaf fresh and hot from the oven.
B)Your neighbor has an ornamental pond that breeds mosquitoes.
C)Your neighbor has invested in beautiful landscaping, increasing the value of all houses on the block.
D)Your neighbor has a pool and has given you an open invitation to come over and swim.

Question

Quizplus · Accepted Answer

A negative externality is a cost imposed on a third party as a result of an economic transaction. In this scenario, the neighbor's ornamental pond may breed mosquitoes, which can potentially spread disease and negatively impact the health of those in the area.

Which of the Following Best Describes a Negative Externality