When an individual buys a car in a congested urban area, it generates ?
Correct answer: D. a negative externality
- A. a positive externality
- B. a technology spillover
- C. an efficient market outcome.
- D. a negative externality
Explanation
A car added to a congested urban road increases travel time for other road users without compensating them. This uncompensated cost is a negative externality, even though driving also provides a private benefit to the car owner.
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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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