Which of the following activities is most likely to produce an externality?
Correct answer: D. A student has a party in her room in the student hall of residence.
- A. A student eats a hamburger in the student union.
- B. A student reads a novel for pleasure
- C. A student sits at home and watches T.V
- D. A student has a party in her room in the student hall of residence.
Explanation
A party can impose noise, disturbance, or other costs on nearby residents who are not part of the transaction, creating a negative externality. The other activities mainly affect the person undertaking them.
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