If a factory emits pollution that affects the health of nearby residents, which of the following is the underlying cause of this negative externality?

The underlying cause of the negative externality in this situation is the factory's decision to prioritize its production and profit over the health and well-being of the nearby residents. When the factory releases pollution into the air or water, it does not have to pay for the harm caused to people living close by, leading to health issues for them. This situation shows that the costs of pollution are not reflected in the factory's operations, which means the factory does not take responsibility for the damage it causes. For example, if the factory produces more goods but makes the air unhealthy to breathe, the residents suffer from respiratory problems without any compensation. This disconnect creates a situation where the factory's actions negatively impact others, highlighting the importance of considering the broader effects of business decisions.