Externalities arise in either production or consumption. Production externalities affect either firms (producer-to-producer externalities) or consumers (producer-to-consumer externalities); consumption externalities may also affect the activities of firms (consumer-to-producer externalities) or those of other consumers (consumer-to-consumer externalities). The same activity may constitute a positive externality for some, but a negative externality for others.Some examples of negative externalities cited in the chapter include the air and water pollution generated by firms in their production activities, the cigarette smoke that non-smokers encounter in public places, and the unsightliness generated by a dilapidated house in a well-kept neighborhood. Persons who suffer these externalities may place different values on them.