Question

Which of the following does not generate an externality? A consumer eating a chocolate bar A...

Which of the following does not generate an externality?

A consumer eating a chocolate bar

A firm emitting pollutants into the air

A householder shovelling snow from the sidewalk outside her house

A person smoking a cigarette amongst other people in a confined space

A beekeeper whose bees pollinate a neighbour's fruit trees

Homework Answers

Answer #1

Negative externality occurs when economic activity by one individual reduces welfare of other.

Option A does not pose negative externality because consumption of chocolate does not affect any other individual in market.

Option B is incorrect because pollutants emissions by one firm reduce quality of life of all people living near that firm.

Option C is incorrect because shovelling ice outisde her house will leave less space for people to walk and drive cars on roads.

Option D is incorrect smoke by one individual pose problems to other because it reduce the quality of air they inhale.

Option E is incorrect because pollinating neighbour's fruit will benefit beekeeper and loss neighbour.

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