Question

Review the definition of an externality to ensure that you fully understand what it entails. Remember that externalities are caused by *market* activity.

As you go about your usual weekly routine this week, be observant of what's happening around you and search for an example of an externality. The externality can be positive or negative, and it can be a consumption (demand-side) or a production (supply-side) externality. When you find your real-life example, take a selfie with the externality behind you. "Selfie" implies that at least a part of your face is in the picture, which ensures that the photo is current and taken by you

Note: The following examples are NOT allowed for use for this assignment and will earn zero points: fireworks, lighthouses, vaccines, smoking/vaping, education, landscaping, talking on the phone while driving, and emissions from cars. While this excludes some of the most obvious examples, if you observe carefully, you'll see that externalities are everywhere!

Post your externality selfie here to the Forum by the deadline following these directions about how to upload your photo (photos not posted following these directions will not earn credit). Do not post anything else with the photo - no words and no explanation.

Answer 1

An externality occurs when an exchange between a buyer and seller has an impact on a third party who is not part of the exchange, and it can be positive or negative. For example, air pollution caused by a manufacturing firm is a negative externality, while benefiting from your neighbor's birdhouses and plants as a bird watcher is a positive externality.

Step-by-step explanation:

An externality occurs when an exchange between a buyer and seller has an impact on a third party who is not part of the exchange. An externality can have a negative or a positive impact on the third party. For example, if a manufacturing firm causes air pollution, it imposes health and clean-up costs on society, which is a negative externality. On the other hand, if your neighbor puts up birdhouses and plants trees and flowers that attract birds, and you as a bird watcher benefit from this without paying for it, it is a positive externality.