Question

An example of a negative externality is the:

A. decrease in your real income that results when photographic equipment you purchase increases in price because of increased demand by others for these items.

B. cost you bear when your neighbor has a noisy party and does not compensate you for your discomfort.

C. benefit you receive without paying when your neighbor installs a smoke detector.

D. decrease in income to farmers that results from a drought.

Answer 1

correct answer is option B (Cost you bear when your neighbor has a noisy party and does not compensate you for your discomfort)

Step-by-step explanation:

Negative externalities are those loss which occur when production or consumption or both are imposed to pay external costs on third parties outside of the market for which no appropriate compensation is paid. This causes social costs to exceed private costs.

so correct answer is option B (Cost you bear when your neighbor has a noisy party and does not compensate you for your discomfort)