Which of the following is considered a negative externality beyond the control of a business?

• A. Increased product quality
• B. Employee training programs
• C. Air pollution caused by factory emissions
• D. Government subsidies for research

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of an externality. An externality occurs when a third party is affected by the actions of a business or individual, without this effect being reflected in market prices.
2. Step 2: Differentiate between positive and negative externalities. A positive externality benefits third parties, while a negative externality imposes costs on them.
3. Step 3: Identify which options represent externalities. Increased product quality and employee training programs generally benefit the business or its direct stakeholders, so they are not externalities.
4. Step 4: Recognize that government subsidies for research are interventions by the government, not externalities caused by the business itself.
5. Step 5: Conclude that air pollution caused by factory emissions is a negative externality because it imposes costs on society (such as health and environmental damage) beyond the control of the business and is not reflected in the factory's production costs.