Which of the following is NOT an example of a negative externality?

• A. A neighbor planting trees that improve air quality
• B. A car emitting exhaust that affects public health
• C. A company dumping waste that harms wildlife
• D. A factory polluting a river used by local residents

Answer: (A)

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 pollution or noise that harms others.
2. Step 2: Analyze each option to determine if it represents a cost imposed on others without compensation. For example, a car emitting exhaust affects public health negatively, which is a classic negative externality.
3. Step 3: Evaluate the option about a company dumping waste that harms wildlife. This also imposes harm on others (wildlife and potentially people), so it is a negative externality.
4. Step 4: Consider the factory polluting a river used by local residents. This pollution negatively affects residents who rely on the river, so it is a negative externality.
5. Step 5: Examine the option about a neighbor planting trees that improve air quality. Since this action benefits others by improving air quality, it is a positive externality, not a negative one.