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Sam and Kyle are longtime neighbors. On sunny days, Sam likes to roast meat over a large open pit in his backyard, filling the air with the smoke. Kyle, on the other hand, likes to hang his bed linen out to dry in the breeze. Normally, Kyle would only dry the rest of his laundry in his dryer, but since he does not like the smell of grilled meat on his bedsheets, he chooses instead to dry all of his laundry in the dryer.

Which of the following represents the effect of the externality caused by Sam’s cooking?

I. Kyle’s increased use of his dryer
II. The smoke from Sam’s cooked meat
III. The amount of meat Sam cooks
IV. The overall amount of laundry Kyle dries


I, II, III and IV


I, III and IV only


I and IV only


I and III only


I and II only

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