Question

All of the following are examples of negative externalities except one. Which is the exception? Select one: a. water pollution b. your roommate going on a diet c. second-hand smoke d. loud conversation in the workplace e. your neighbor building a bomb shelter on her front lawn

Answer 1

Answer: b. your roommate going on a diet

Explanation: Extrenality refers to the cost or benefit which affects an individual without consenting to the cause. In other words negative externalities are costs which affects an individual usually a third party without choosing to incur such cost. They may be as a result of a transaction or action between a producer or manufacturer and it's client. When such action or transaction indirectly affects a third party who isn't involved in the transaction, the such action or transaction is an externality. If the action involves the third party incurring a cost, then we have negative externality.

From the question above, one's roommate is not an example of negative externality as going on a diet is a personal decision and not a result of an action which has an indirect effect on him or her.

Answer 2

Answer:

b. your roommate going on a diet        

Explanation:

A negative externality is a cost born by a third party as a result of the actions or activities of someone else. Second-hand smoke, loud conversation, water pollution are all examples of negative externalities, the cost of these actions are born by a party other than those who caused it.