Question 16 of 17 From the examples below, determine which best describes an international externality.

a. Global warming fears rise as a result of increased pollution in Singapore.

b. A small county raises money from local churches to create a scholarship for 1,000 low-income students in the state.

c. Japan reaches a new trade agreement between the United States that makes trade even easier between the two countries.

d. Increased traffic in American cities due to the rise of Uber

Option (a) is correct.

Explanation:

Externality is the consequence of an activity which affects the third party either in a positive way or in a negative way.

There are two types of externalities are as follows:

(i) Positive externality: When the third party is positively affected by an economic transaction between the two parties.

(ii) Negative externality: When the third party is negatively affected by an economic transaction between the two parties.

In our case, there is an increase in the level of pollution created by Singapore which results in an increase in the global warming. This will affect the whole world in a negatively manner and also affect their level of GDP.

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the answer is true

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