Question

A homeowner planting an attractive garden in front of his house creates ________.

A bakery baking bread creates ________.
A) no externality; a positive production externality
B) a positive consumption externality; no externality
C) no externality; no externality
D) a positive consumption externality; a positive production externality
E) a positive production externality; no externality

Answer 1

A homeowner planting an attractive garden creates a positive production externality, while a bakery baking bread creates no externality.

Step-by-step explanation:

The homeowner planting an attractive garden in front of his house creates a positive production externality, while a bakery baking bread creates no externality.

• The homeowner planting an attractive garden in front of his house creates a positive production externality because it enhances the visual appeal of the neighborhood and increases property values for neighboring houses. It benefits the community and neighbors without any additional cost to them.
• A bakery baking bread creates no externality because it does not have any significant positive or negative impact on third parties. The bakery's production and sale of bread primarily benefit the customers who willingly purchase the bread.