Question 8 Which of the following activities is likely to re

Question 8. Which of the following activities is likely to result in a negative consumption externality? (a) Development of new production technologies (b) Driving (c) Excessive risk taking in the banking sector (d) Over fishing

Solution

Ans:

Option B

Driving

Negative externalities occur when production and/or consumption causes a negative impact on an unrelated third party. Driving will cause a negative consumption externality.

Over fishing results in negative production externality.In case of over fishing,the supply increases and this decreases the price resulting in the negative production externality.