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Negative externalities are created when

A. an increase in the price of butterfat drives up the price of ice cream.
B. a driver leaves his car in a parking space after the meter expires and receives a ticket.
C. a driver drives recklessly on a busy highway.
D. a driver pulls over to help a stranded motorist fix a flat tire.

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Answer:

The correct answer is (C)

Explanation:

Negative externalities occur when an individual or firm making a choice negatively affect other parties.  A driver who recklessly drives a car on a busy highway is a negative externality because the amusement of the driver is negatively affecting other people. A negative externality arises when the benefit of a decision is less than the negative outcomes of that decision.

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