A negative externality in consumption means that:
Correct answer: A. A consumer's purchase harms a third party
- A. A consumer's purchase harms a third party
- B. A producer's output benefits another producer
- C. A consumer receives all benefits from a purchase
- D. A firm pays every cost created by production
Explanation
A negative consumption externality imposes an uncompensated cost on someone outside the transaction, such as noise affecting neighbours. The harm is not fully reflected in the buyer's private decision.
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About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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