Water pollution from pulp and paper mills harms plants, animals, and humans. This is an example of
A)a market failure caused by an externality.
B)a market failure caused by market power.
C)a market failure caused by equality.
D)There is no market failure in this case.

Question

Quizplus · Accepted Answer

This is an example of a market failure caused by an externality, specifically a negative externality. The pulp and paper mills are not considering the negative impact their pollution has on the environment and individuals outside of their market transactions, leading to an inefficient allocation of resources.

Water Pollution from Pulp and Paper Mills Harms Plants, Animals