Pollution from cars is an example of a. a harmful opportunity cost. b. a negative externality. c. a production dislocation. d. none of the above.

Short Answer

Expert verified
The correct choice is b. a negative externality, as pollution from cars affects parties not directly involved, such as people suffering from health problems related to air pollution.

Step by step solution

01

Understand the terms

Before choosing the correct answer, we must comprehend the economic terms mentioned in the choices. a. Opportunity cost: The cost of an alternative that must be forgone to pursue a particular action. In other words, it is the value of the next best alternative that is given up when a decision is made. It is not necessarily harmful. b. Negative externality: A cost that affects a party who did not choose to incur that cost. It is an undesirable side effect or consequence of an economic activity that affects parties not directly involved in that activity. For example, cars cause air pollution, and those affected by the pollution did not choose to incur the cost. c. Production dislocation: Associated with situations where production is inefficient, or resources are misallocated. It usually results from market imperfections or other factors that limit productive capacity.
02

Identify the correct choice for pollution from cars

Now that we have an understanding of the terms, we can analyze how pollution from cars fits into these definitions. a. Opportunity cost: Pollution from cars is not a result of forgoing an alternative option but is an effect of car usage. b. Negative externality: Pollution from cars is a cost that affects parties not directly involved, such as people suffering from health problems related to air pollution. c. Production dislocation: Pollution from cars is not a result of inefficiencies in production or resource misallocation.
03

Select the correct answer

Based on the analysis above, it is clear that pollution from cars is an example of a negative externality, as it affects parties who did not choose to incur the cost of that pollution. So, the correct choice is: b. a negative externality.

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