Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Individuals make decisions solely based on personal benefit without considering societal costs.
B
Individuals are influenced by social norms and peer pressure when consuming goods that create negative externalities.
C
The government should always intervene to correct market failures without considering consumer behavior.
D
Externalities have no effect on consumer choice and market equilibrium.
Understanding the Answer
Let's break down why this is correct
Answer
Negative externalities in consumption happen when a person's actions negatively affect others who are not involved in that decision. For example, if someone smokes in a public place, they might enjoy their cigarette, but the smoke can harm the health of those nearby. From a behavioral economics perspective, people often focus on their immediate satisfaction without considering how their choices impact others, leading to poor decisions for the community. This can result in overconsumption of harmful goods, as individuals underestimate the social costs involved. Understanding this helps us find ways to encourage more responsible behavior that takes others into account, like implementing public smoking bans.
Detailed Explanation
People often follow what their friends or society thinks is cool. Other options are incorrect because This idea suggests people only think about themselves; This option assumes the government should always step in without understanding how people think.
Key Concepts
behavioral economics
Topic
Negative Externalities in Consumption
Difficulty
easy level question
Cognitive Level
understand
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