Question

Which of the following is an example of a positive externality (additional social benefit)?

A. An increase in the value of land you own when a nearby development is completed
B. The costs paid by a company to build an automated factory
C. Falling property values in a neighborhood where a disreputable nightclub is operating
D. The higher price that you pay when you buy a heavily advertised product

Answer 1

A positive externality occurs when a third party benefits from a transaction or activity. In this case, the increase in the value of land you own when a nearby development is completed is a positive externality.

Step-by-step explanation:

The correct answer is A. An increase in the value of land you own when a nearby development is completed.

A positive externality occurs when a third party benefits from a transaction or activity that they are not directly involved in. In this case, when a nearby development is completed, the value of land that you own increases. This increase in value is a positive externality because it benefits you without any direct involvement on your part.

Other examples of positive externalities include vaccinations against disease, which protect not only the individuals who receive them but also others who may become infected, and the modernization and restoration of homes in a neighborhood, which increase the value of those homes and other properties in the neighborhood.