Which of the following is an example of a negative externality?
A) An increase in the value of land you own when a nearby development is completed
B) The costs paid by a company to build an automated factory
C) Falling property values in a neighborhood where a disreputable nightclub is operating
D) The higher price you pay when you buy a heavily advertised product

Question

Quizplus · Accepted Answer

Falling property values negatively affect the property owners, thus creating a negative externality. The disreputable nightclub is the source of the negative externality.

The other options do not fit the definition of a negative externality. A increase in land value or costs paid by a company are not affecting any third party directly. A higher price for a heavily advertised product is not an externality as it only affects the buyer.

Which of the Following Is an Example of a Negative