Indian Economic Development: Environment and Sustainable Development · Class 12 · CBSE · Commerce Economics
A factory releases untreated waste into a river. The factory avoids the cost of treatment, while farmers and households downstream suffer losses. Wha…
Practice question from Indian Economic Development: Environment and Sustainable Development (Class 12 · CBSE · Commerce Economics), with the correct answer and a step-by-step solution.
hard · MCQ · Q-F33456
A factory releases untreated waste into a river. The factory avoids the cost of treatment, while farmers and households downstream suffer losses. What economic problem is best illustrated by this situation?
- A.Positive externality, because downstream users benefit from industrial production
- B.Negative externality, because pollution imposes costs on people not involved in the transactionCorrect answer
- C.Private benefit, because all costs are paid by the factory
- D.Sustainable use of a common resource, because the river absorbs the waste
Solution
The factory imposes pollution-related costs on downstream users without compensating them. This is a negative externality, in which the social cost of production exceeds the private cost borne by the producer.
More from Indian Economic Development: Environment and Sustainable Development
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