Question

The lease on Allison's apartment will expire next month and she wants to move closer to campus. There are two apartments that she likes. Both are close to campus and in her price range. The first one is next door to a garage where local bands often practice late at night. The second one is next door to a donut shop that opens at 5 a.m.

If she likes to stay up late and loves listening to all kinds of music, she will view the bands practicing as a(n):

If she is a morning person and loves the smell of donuts, she will view the donut shop as a(n):

If her roommate hates loud music and the smell of donuts makes her sick, she will reject both apartments due to what she sees as:

Answer 1

a) External benefit

b) External benefit

c) External cost

Step-by-step explanation:

External benefit refers to a benefit that a person cannot control. It occurs when consuming a good produces a benefit to a third party.

External cost, on the other way, refer to costs imposed upon a third party when goods and services are consumed.

So external benefits are seen as something positive while external cost are seen as something negative. Neither of them have to do with the person but they are part of the process of consuming a good or a service.

So we have that Allison has two choices:

1. An apartment next door to a garage where local bands practice late at night.
2. An apartment next door to a donut shop that opens at 5 am.

So,

a) If she likes to stay up late and loves listening to all kinds of music, she will view the bands practicing as a(n):

External benefit, since she cannot control the music coming from the garage so it's imposed to her.

But since she likes to stay up late and listening to music she will see it as something good. Therefore it will be seen as an external benefit.

b) If she is a morning person and loves the smell of donuts, she will view the donut shop as a(n):

Again, she cannot control the smell of donuts coming or the fact that the shop opens at 5, however, she is a morning person and likes donuts so she will see this as something good and therefore it will be an external benefit.

c) If her roommate hates loud music and the smell of donuts makes her sick, she will reject both apartments due to what she sees as:

Now we have that her roommate hates loud music and the smell of donuts, she cannot control either of these and since she hate them they will be seen as something negative so it will be seen as an external cost.