Which of the following is an example of a negative externality that leads to market failure?

A negative externality occurs when an economic activity causes harm to others who are not involved in that activity. For example, think about a factory that produces goods but also releases smoke and pollution into the air. The factory owners benefit from making their products, but the nearby residents suffer from poor air quality and health issues, which they did not choose. This situation can lead to market failure because the factory does not pay for the damage it causes, resulting in too much pollution and not enough consideration of the community's well-being. Therefore, the factory's actions negatively affect others, showing how externalities can disrupt the balance of the market.