Question 53

Moving a noisy, large manufacturing plant to a small town creates a negative externality.

This action is likely to impose costs on the local community, such as increased noise pollution and potential health risks, without compensating those affected. The presence of a large manufacturing plant can disrupt the quality of life for residents in the vicinity.

A) Building a private school in a rural and underdeveloped area

This action is unlikely to create a negative externality as it generally provides educational benefits to the community, enhancing human capital and potentially leading to positive social outcomes. The establishment of a school can improve local property values and foster economic development.

B) Taking a commuter train with frequent stops to work

Taking a commuter train primarily benefits the individual commuter by providing a means of transportation while also potentially reducing traffic congestion and emissions. Therefore, this action does not produce negative externalities; instead, it can lead to positive effects on the environment and community infrastructure.

C) Expanding the number of beehives near an apple orchard

This action is beneficial as it supports pollination, which can improve apple yield and quality. The expansion of beehives is likely to create positive externalities by enhancing agricultural productivity rather than negative ones.

D) Moving a noisy, large manufacturing plant to a small town

This action creates a negative externality due to the potential increase in noise and air pollution affecting residents' health and well-being. The costs incurred by the community, such as decreased quality of life and potential property devaluation, are not compensated for by the plant's operations.

Conclusion

The correct answer is D, as relocating a noisy manufacturing plant imposes significant external costs on the local population, leading to negative consequences for their quality of life. In contrast, the other options either provide benefits or do not impose unaccounted-for costs on others, highlighting the importance of considering externalities in economic decision-making.