Which of the following is a negative externality associated with the construction of the Hetch Hetchy Reservoir?

• A. Reduction in waterborne diseases
• B. Loss of natural habitat and biodiversity in the valley
• C. Increase in recreational opportunities for local residents
• D. Improved water supply for San Francisco

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of a negative externality. A negative externality occurs when an economic activity imposes a cost on third parties who are not involved in the activity, such as environmental damage or health risks.
2. Step 2: Identify the effects of constructing the Hetch Hetchy Reservoir. Consider both positive and negative impacts on the environment and society.
3. Step 3: Evaluate each option to determine if it represents a cost imposed on others (negative externality) or a benefit (positive externality or private benefit).
4. Step 4: Recognize that 'Reduction in waterborne diseases' and 'Improved water supply for San Francisco' are positive outcomes, not negative externalities.
5. Step 5: Conclude that 'Loss of natural habitat and biodiversity in the valley' is a negative externality because it represents environmental harm affecting ecosystems and third parties.