Which of the following best describes a negative externality?

A negative externality happens when someone’s actions cause harm or costs to others who are not involved in that action. For example, if a factory pollutes the air while making products, the nearby residents suffer from bad air quality and health problems, even though they are not part of the factory's operations. This means that the factory is not paying for the damage it causes to the community, leading to a situation where the true costs of its production are not reflected in the price of its products. This can result in overproduction of goods that harm others, as the factory does not face the full consequences of its actions. Understanding negative externalities is important because it highlights the need for regulations or solutions to protect those affected.