What are negative externalities? Positive consequences of economic activities Damages caused by pollution that are fully compensated Situations where the party causing damages doesn't pay for them in full Situations where government subsidies cover all external costs
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This means that the costs of the negative consequences of economic activities are not fully borne by the party responsible for them. Show more…
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What type of externality (positive or negative) is present in each of the following examples? Is the marginal social benefit of the activity greater than or equal to the marginal benefit to the individual? Is the marginal social cost of the activity greater than or equal to the marginal cost to the individual? Without intervention, will there be too little or too much (relative to what would be socially optimal) of this activity? a. Mr. Chau plants lots of colorful flowers in his front yard. b. Your next-door neighbor likes to build bonfires in his backyard, and sparks often drift onto your house. c. Maija, who lives next to an apple orchard, decides to keep bees to produce honey. d. Justine buys a large SUV that consumes a lot of gasoline.
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