Question

Which of the following is not an example of an externality?

• You bring in trash cans from the curb rather than leaving them for your neighbors to see all week.  

• You live alone and left a mess of dishes from lunch.

• Your employer requires all staff to wash their hands before serving lunch to guests.

• Your college roommate plays Call of Duty in the living room keeping you up the night of an exam.

Answer 1

Externality is the effect of an agents action on others. Like industry near water body will pollute the water so its action to produce will affect other by polluted water.

This the cases above :-

1) Your action of bringing in trash cans will have affect on your neighbours. So this is externality.

2) Not washing dishes will not affect anyone as it will only affect you as you live alone. So it is not externality.

3) All staff washing their hands will keep the guests healthy. If hands not washed can have affect on guest's health. So it is also externality.

4) Playing Call of Duty late night and keeping you up at night will be externality as action of ur roommate (playing) has effect on you(not able to sleep).

So only second option is not externality.