Lesson eLearning

A textile mill releases dye‑laden effluents into a nearby river, harming the fishermen downstream. This effect on the fishermen is an example of:

easy MCQ 1 mark Class 12 · Economics · Environment and Sustainable Development
  1. Positive production externality
  2. Negative production externality
  3. Positive consumption externality
  4. Negative consumption externality
Answer
Negative production externality

The correct answer is Negative production externality — Since the effect is harmful and originates from production, it is a negative production externality.

Step-by-step solution

  1. Identify that the effect is caused by the producer (the mill).
  2. Recognise that the effect reduces the welfare of third parties (fishermen).
  3. Since the effect is harmful and originates from production, it is a negative production externality.
Common mistake: Confusing it with a positive or consumption externality

Concept tested: Externalities

Published · How this solution was prepared and checked

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