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Answer to Question #48108 in Other Economics for Billy

Question #48108
An example of a negative externality is:

the reduction in profits for your company that occurs when there is a decrease in consumer demand for the product you manufacture. or

the sleep you lose when your neighbor throws a loud party next door that keeps you awake. or

the additional friends you make when you move into a dorm with a shared bathroom. or

all of the above
Expert's answer
First of all it is necessary to define the concept of negative externality. A negative externality is a cost that is suffered by a third party as a result of an economic transaction. In other words it occurs when an economic transaction causes a harmful effect to a third party.
So, an example of a negative externality is the sleep you lose when your neighbor throws a loud party next door that keeps you awake.

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