Which of the following activities will most likely impose an external cost?

• A. A student studying quietly in a library
• B. A factory releasing pollutants into a river
• C. A homeowner planting flowers in their front yard
• D. A company providing free vaccinations to its employees

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of external costs (negative externalities). These occur when an activity imposes a cost on third parties who are not involved in the activity, and this cost is not reflected in the market price.
2. Step 2: Analyze each activity to see if it imposes costs on others outside the decision-maker. For example, a student studying quietly in a library generally does not harm others, so no external cost is imposed.
3. Step 3: Consider the factory releasing pollutants into a river. Pollution can harm people downstream, damage ecosystems, and create health problems, which are costs borne by others, not the factory. This is a classic example of an external cost.
4. Step 4: Evaluate the homeowner planting flowers. This activity typically benefits the neighborhood by improving aesthetics and does not impose costs on others, so no external cost is present.
5. Step 5: Look at the company providing free vaccinations to employees. This activity likely has positive externalities (benefits to others), not external costs, because it reduces disease spread and improves public health.