10. Negative externality is a. Pollution from nearby factory production b. Noise

Question

10. Negative externality is a. Pollution from nearby factory production b. Noise and traffic jam from commuting people in cars and buses C. Spreading knowledge from research and development d. Monopolistic behavior of company owning unique natural resources 11. Important milestones for fiscal policy and public finance development were a. Great Depression in 1930s b. Oil crisis in 1970s c. Olympic games in ancient Rome d. Housing and financial crisis in 2008 e. Flight of Gagarin in 1961 12. Define the fiscal multiplier and its role in fiscal policy

Explanation / Answer

10.

Answer: a

Due to any economic activity (like production, manufacturing, etc) if the third is sufferer then this is a negative externality.

In this case the production house is first party, consumer is second party; therefore, the third party (who has no part in the above economic activity) is society as a whole. Pollution affects the society; therefore, this is negative externality.

Other options are not correct:

b. All driving are not business purpose; therefore, such noise is not negative externality.

c. Knowledge is good for society; therefore, this is not negative externality.

d. Such behavior is a character of business; therefore, there is no harm in it.

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