Which of the following is an example of an externality?
A)A paper mill dumps waste into the river.
B)A neighbor's loud music disrupts sleep.
C)A drunk driver causes an accident that injures another person.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

All of the above examples involve an externality, which is a cost or benefit that affects someone who is not directly involved in the production or consumption of a good or service. The paper mill dumping waste into the river creates a negative externality by harming the environment and wildlife downstream. The neighbor's loud music creates a negative externality by disturbing the sleep and peace of mind of other residents nearby. The drunk driver causing an accident that injures another person creates a negative externality by imposing physical and emotional harm on someone who was not involved in the decision to drink and drive.

Which of the Following Is an Example of an Externality