Question

It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. Operators of hydroelectric generating plants on the river find that they must clean up the river's water before it flows through their equipment. The above situation is an example of___________.

Answer 1

Answer:

negative externality

Explanation:

A negative externality happens when a third party suffers from an economic transaction carried out by someone else.

In this case, the original economic transaction occurs when the paper mills decide to pollute the river instead of properly disposing their wastes. As a result of that previous transaction, a third party (the hydroelectric generating plant) must spend money and resources to clean up the pollution generated by the paper mills.