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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

      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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