For an output level below qe , the value of a unit to a buyer is the cost of a unit to a seller. suppose a firm that produces for this market is able to dump toxic chemicals into a river next to its factory, which poisons wildlife and harms the health of nearby residents, who have no business with the company. this scenario is characterized by , which is an example of .

The correct answer here is: externality; market failure.

Explanation:

An externality can be defined as a situation in which cost or benefit generated by someone is incurred or received by a third party.

In this situation, the dumping of chemicals in the river is causing pollution which is harming wildlife and the nearby residents. The residents have to incur costs because of the activities of the firm. This is an example of negative externality.

The cost borne by the residents is not included in the price of the firm's product. This is an example of market failure.

a.   is the correct choice.

good luck. : )

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