Question

Dina is driving to work on an interstate highway at 90 MPH, well in excess of the legal speed of 65 MPH. Sandy is also driving to work at the same time, going 85 MPH. A state trooper pulls Dina over and gives her a speeding ticket. Sandy continues driving, but if Dina had notbeen speeding, the trooper would have ticketed Sandy instead. In terms of externalities, this story shows that:

Sandy's actions gave Dina a positive externality.
Dina's actions gave Sandy a positive externality.
Sandy's actions gave Dina a negative externality.
Dina's actions gave Sandy a negative externality.
Dina's and Sandy's actions did not create any externalities.

Answer 1

The correct answer is: Dina's actions gave Sandy a positive externality.

Step-by-step explanation:

An externality is an economic term that refers to the unintended cost or benefit in which an individual incurs, which impact is not fully reflected on the price system.

A positive externality occurs when a third-party is (unintendedly) benefited from an activity or economic transaction that he didn't take part of.

In this case, the fact that Dina got the ticket for speeding, prevented Sandy from getting it. This benefit for Sandy was unintended, and we call it a positive externality.