Question

Chlorofluorocarbons (CFCs) are the substances used in refrigerators and air conditioners. CFCs can cause the destruction of the ozone layer that surrounds the Earth and which protects humans from ultraviolet radiation. The use of CFCs is positively related to economic growth; that is, a richer country, such as the U.S., has a higher use of CFC-containing products. Poorer countries, such as Haiti, use fewer products containing CFCs but nonetheless suffer from the effects of a depleted ozone layer. Is the use of products containing CFCs by Americans an example of a negative externality? Group of answer choices

No. Products containing CFCs do not provide any type of externality. The costs of using products containing CFCs are entirely included in prices.

Yes, but only if the CFCs affect Americans who use or purchase products containing CFCs.

Yes, but only if the CFCs affect Haitians who do not use or purchase products containing CFCs.

No. Products containing CFCs provide to Haitians the positive externality of cool air during summertime heat and humidity.

Answer 1

Is the use of products containing CFCs by Americans an example of a negative externality? Group of answer choices

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Correct choice:

Yes, but only if the CFCs affect Haitians who do not use or purchase products containing CFCs.

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As per definition, a negative externality arises if an economic activity causes harm to a bystander.

Here, Haitians become bystanders, only if they do not use any product containing CFCs.

As per the case, richer countries use more CFCs, and poorer countries bear the burden. If this is true, then the rich countries are imposing a negative externality on the poor.

In this case, if Haitians are using a substantial amount of products, equal in proportion to their size as compared to the US, it cannot be claimed that a negative externality has been created. However, it is clear that a large population of Haiti doesn't use such products. The per capita use in USA is much higher than in Haiti.

Hence, a negative impact is indeed created.