Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
They increase social welfare by providing more goods.
B
They decrease social welfare by imposing costs on third parties.
C
They have no effect on social welfare.
D
They only affect the consumers directly involved.
Understanding the Answer
Let's break down why this is correct
Answer
Negative externalities in consumption occur when the consumption of a good or service harms others who are not directly involved in that transaction. For example, when someone smokes in a public place, the smoke can affect the health of nearby non-smokers, leading to increased healthcare costs for society. This means that the true cost of smoking is not just borne by the smoker but also by others, which can reduce overall social welfare. When these negative effects are not accounted for, it can lead to overconsumption of harmful products, worsening public health and increasing economic burdens on the community. Ultimately, addressing negative externalities through regulations or taxes can help improve social welfare by reducing harm to others and encouraging healthier choices.
Detailed Explanation
Negative externalities happen when someone’s actions hurt others. Other options are incorrect because Some might think that more goods mean more happiness; It's a common belief that some actions don’t affect others.
Key Concepts
welfare economics
Topic
Negative Externalities in Consumption
Difficulty
easy level question
Cognitive Level
understand
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