The degradation of the environment from litter is aA. a negative externality. B. free rider problem. C. Tragedy of the Commons. D. Both a and c are correct.

Answer: Negative externality

Explanation:

Externality is the benefit or damage that impacts on a third party not involved in the production or consumption decision. Externalities often occur when the production or consumption of a product. Externalities can either be positive or negative.

A negative externality is the cost that is borne by a third party as a result of an economic transaction of another individual. In a transaction, the producer and the consumer are the first and the second party while the third parties are the individuals, resources organizations and property owner indirectly affected. Externalities are also called spillover effects or external cost.

The degradation of the environment from litters is a negative externality because the action of an individual or firm has a negative effect on a third party.