Choose the italicized word in parentheses that

best completes each sentence.

1. Acid rain is an example of a (n) (externality/

free rider).

There are four types of externalities : Positive consumption, Negative consumption, positive production and negative production. The Acid rain and the pollution emitted by the factories can pollute the environment and affect the health of nearby residents. The negative externalities occur when external costs are imposed on the third party which is outside the market due to consumption and production and no compensation is paid to them.