Question

Which of the following is an example of a negative externality? Falling property values in a...

Which of the following is an example of a negative externality?

Falling property values in a neighborhood where a disreputable nightclub is operating

The costs paid by a company to build an automated factory

An increase in the value of land you own when a nearby development is completed

The higher price you pay when you buy a heavily advertised product

Homework Answers

Answer #1

Falling property values in a neighbourhood where a disreputable nightclub is operating.
The negative externality means the negative impact occurred for a third party during the process. Here the disreputable nightclub create disturbance for the nearby people and they tried to leave the place because of this annoying situation. The nightclub was very rushed and several numbers of people were come towards there. This will increase the revenue of the nightclub; at the same time this will create negative effect on the neighbouring society.
There is an external cost occurred during this situation. The marginal social cost of the nightclub over the neighbours was greater than the marginal social benefits. The next welfare loss is the falling property value of the society. The falling property right will affect that particular area and this will affect the business of the real estates.

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