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Question

When an individual’s consumption decreases the wellbeing of others, but the individual does not compensate those others. It is the case of__________.

A Positive Production Externality Correct Answer Incorrect Answer
B Negative Production Externality Correct Answer Incorrect Answer
C Positive Consumption Externality Correct Answer Incorrect Answer
D Negative Consumption Externality Correct Answer Incorrect Answer
E None of these Correct Answer Incorrect Answer

Solution

Negative Consumption Externality (MSB < MPB) is where an individual’s consumption decreases the wellbeing of others, but the individual does not compensate those others. Examples include excessive drinking of alcohol, smoking, obesity, motor vehicle pollution and using a noisy motorcycle.

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