Question

Air pollution from burning fossil fuels causes damages to crops and public health. This is an example of a market failure caused by an externality. a market failure caused by market power. a market failure caused by equality. There is no market failure in this case.

Answer 1

Answer: Option (a) is correct.

Step-by-step explanation:

Air pollution is created from burning of fossil fuel which causes damages to the crops and health of the people. This is a negative externality that is generated by burning fossil fuels.

Externality is a side effect of an activity that is operated by a particular industry or people which affects the other parties and this cost is not included in the cost of goods and services.

There are two types of externalities ; Positive and Negative externality.

Negative externality refers to the externality that affects the other parties in a negative way. For example, smoking.

Positive externality refers to the externality that affects the other parties in a positive way. For example, Education.