Question: A negative externality occurs when: O actions intended to reduce the consequences of risk end up promoting riskier behavior. the economic actions of one party

A negative externality occurs when: O actions intended to reduce the consequences of risk end up promoting riskier behavior. the economic actions of one party impose uncompensated costs on an unrelated party. one party to a transaction has superior information relative to another party, O high-risk groups are the most likely to take part in an economic activity

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1. Identify your reference point when making a decision based on an element of risk.

3. If there are reasonable alternatives, think about your decisions based on the different reference points and see if there are any contradictions in the decisions.

4. It is only at this point that you can give the problem your full attention in relation to the various ways you have framed the problem.