Which of the following illustrates the concept of a negative externality? a. A college professor plays a vigorous game of racquet ball with the racquet he recently purchased. b. A flood wipes out a farmer's corn crop. c. A college student plays loud music on his new stereo system at 2:00 a.m. d. A janitor eats a hamburger during his lunch break.

c. A college student plays loud music on his new stereo system at 2:00 a.m

Explanation:

Negative externality can be said to occur when the cost of consumption of a good consumed by an individual is imposed also on a third party. In order words, consumption of a good results also in a negative effect on a third party.

For example, out of the options given in the question above, the option that best illustrates the concept of negative externality is option C, “A college student plays loud music on his new stereo system at 2:00am”.  

The consumption of the new stereo system will produce an unpleasant effect and irritation to other neighbors as the college student plays loud music at such odd time of the day. This noise pollution that the new stereo system causes is the negative effect other people around him suffers as the third party.

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