Question

Which of the following is a negative externality

Answer 1

Answer: Risks to nonsmokers from second-hand smokers

Explanation: Externality occurs when the government, group of individuals impose cost or benefit on others but have no provision or incentive to take the cost or benefits into account. It could also be seen as the risk or benefit which affect an individual who does not choose to incur such risk or benefit.

Negative Externality is thus the risk or cost which affects an individual who does not wish to be exposed to such risk or incur such cost.

Therefore, In the scenario above, the risk to nonsmokers to second hand smokers is an example of negative externality due to the fact that the nonsmoker is exposed to risk against his wish.