If a highway is congested, then use of that highway by an additional person would lead to a
A)negative externality.
B)positive externality.
C)Pigovian externality.
D)free-rider problem with rush-hour drivers stuck in traffic.

Question

Quizplus · Accepted Answer

A negative externality occurs when the action of one individual or firm adversely affects another individual or firm, without this effect being accounted for in the cost of the action. In the case of a congested highway, an additional person using the highway increases traffic for everyone else, worsening congestion and increasing travel times, without bearing the full cost of these impacts. This is a classic example of a negative externality.

If a Highway Is Congested, Then Use of That Highway