<p>You are correct: in the circumstances described the disturbance to neighbours constitutes a negative consumption externality.</p>
<p>I have tried to imagine why someone might think the externality is on the production side.  Possibly they were thinking of commercial firework displays, organised on a large scale with spectators paying for entry. In that case the organisation of the displays would itself be a production activity, and it would be correct to attribute an externality arising from any disturbance to neighbours to production, rather than to the passive consumption of spectators.  But that is clearly not the scenario specified in the question 3.  The setting off of fireworks by people in their backyards for themselves and perhaps family and friends is clearly consumption.  Admittedly it involves activity, but so does much consumption, eg cooking purchased food, consuming gasoline when driving.</p>

CC BY-SA 4.0
2023-04-28T04:41:32.753Z
Thank you for the answer. I also can't find why they put it on cost curve. What bothers me is that this question is from AP Microeconomics 2013 Paper - an exam 60,000+ high school students take annually, and this is the official answer key to grade students. Why did they do that, I don't know.
MangoPizza
CC BY-SA 4.0
2023-04-27T18:55:49.453Z
2023-04-27T18:55:49.453Z
Adam Bailey
<p>I am given a question to plot supply-demand for firecrackers. Bursting firecrackers produce noise so we have plot the externality in the graph.</p>
<p>In the answer key, it is given that due to the noise, there is a negative externality on the supply curve (MSC &gt; MPC).</p>
<p>I am super confused - Shouldn't it be a consumption externality (so MSB &lt; MPB) since the consumption provides negative benefits to society?</p>
<p>Thanks!</p>
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<microeconomics><supply-and-demand><externalities>
Should firecrackers which disturb neighbours be a production externality or consumption externality?
MangoPizza
# Should firecrackers which disturb neighbours be a production externality or consumption externality?

(Asked by: username_0 on 2023-04-27)

I am given a question to plot supply-demand for firecrackers. Bursting firecrackers produce noise so we have plot the externality in the graph.

In the answer key, it is given that due to the noise, there is a negative externality on the supply curve (MSC > MPC).

I am super confused - Shouldn't it be a consumption externality (so MSB < MPB) since the consumption provides negative benefits to society?

Thanks!

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**Tags:** microeconomics, supply-and-demand, externalities

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## 1 answers

### Answer by username_1 on 2023-04-27. Score: 3

You are correct: in the circumstances described the disturbance to neighbours constitutes a negative consumption externality.

I have tried to imagine why someone might think the externality is on the production side. Possibly they were thinking of commercial firework displays, organised on a large scale with spectators paying for entry. In that case the organisation of the displays would itself be a production activity, and it would be correct to attribute an externality arising from any disturbance to neighbours to production, rather than to the passive consumption of spectators. But that is clearly not the scenario specified in the question 3. The setting off of fireworks by people in their backyards for themselves and perhaps family and friends is clearly consumption. Admittedly it involves activity, but so does much consumption, eg cooking purchased food, consuming gasoline when driving.

> **Comments:**
> **username_0**: Thank you for the answer. I also can't find why they put it on cost curve. What bothers me is that this question is from AP Microeconomics 2013 Paper - an exam 60,000+ high school students take annually, and this is the official answer key to grade students. Why did they do that, I don't know.  

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