A city is considering building a new factory that will produce bicycles. While it promises to create jobs and boost the local economy, nearby residents are concerned about potential air pollution and increased traffic. Which of the following best describes the externalities involved in this situation?

In this situation, the externalities refer to the unintended effects that the new bicycle factory will have on people who are not directly involved in its operations. On one hand, the factory can create positive externalities by providing jobs, which helps the local economy grow and can improve the quality of life for residents. On the other hand, the factory may cause negative externalities, such as air pollution from its operations and increased traffic from workers commuting to and from the site. For example, while some people may benefit from the new jobs, others might suffer from breathing difficulties due to pollution or find it harder to get around because of the extra cars on the road. This shows how the factory's impact goes beyond just its immediate business activities, affecting the wider community in both good and bad ways.