Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
They create inefficiencies as the true cost to society is higher than the market price.
B
They ensure that all homeowners plant the optimal number of trees.
C
They lead to an increase in property values for all homeowners.
D
They decrease the overall demand for trees in the market.
Understanding the Answer
Let's break down why this is correct
Answer
Negative externalities in consumption occur when the actions of one person affect others in ways that are not reflected in the market price. For example, if someone has a tree that sheds leaves onto their neighbor's yard, the neighbor has to deal with the mess without any compensation. This situation can lead to market failure because the true cost of owning the tree is not fully considered in its value. If the owner of the tree doesn't take responsibility for the leaves, they might enjoy the benefits of their tree without paying for the inconvenience caused to others. In this way, the market fails to allocate resources efficiently, creating tension between neighbors and potentially leading to disputes.
Detailed Explanation
When people consume things like trees, they might not think about the extra costs to others. Other options are incorrect because Some might think that negative effects make everyone plant the right number of trees; It's a common belief that more trees always raise property values.
Key Concepts
Negative Externalities
Market Failure
Government Intervention
Topic
Negative Externalities in Consumption
Difficulty
hard level question
Cognitive Level
understand
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