Question

Which of the examples below illustrates the economic principle of a negative external costs. Which of the examples below illustrates the economic principle of a negative external costs. cost of rebuilding roads damaged by trucks heavily loaded with goods cost of labor to produce a product cost or benefit of a transaction that involves the buyer or seller when both parties lose money cost of transportation of goods from the site of production to a market.

Answer 1

Answer:

Cost of rebuilding roads damaged by trucks heavily loaded with goods

Explanation:

This a classical example of a negative external cost, also known as a negative externality. An externality is a cost that affects a third party. A third party in an economic transaction is someone who is not the producer or the consumer.

In this example, trucks are heavily loaded because a firm (the producer) is supplying the demand for goods of consumers. However, the damages on the road are affecting every person who lives in the area, whether they take part on the transaction or not.