Question

Ed and Alice plan to lease space in a strip mall for their antique business. They are trying to decide between the only two locations in their price range. Location 1 is between a dry cleaner and a used tire shop. Location 2 is between a doughnut shop and a pizza shop. Classify the items as an external cost or external benefit and for which location. External cost of location 1 External benefit of location 1 External cost of location 2 External benefit of location 2 Answer Bank The dry cleaner is stinky. The pizza shop smells delicious.

The tire shop is very noisy. The pizza shop is always busy, which draws people to the strip mall.
The dry cleaner is always busy, which draws people to the strip mall.
The doughnut shop smells delicious.

Answer 1

There are external costs and benefits associated with each location option. Location 1 has the external cost of a stinky smell from the dry cleaner, but also the external benefit of attracting potential customers due to the busy traffic generated by the dry cleaner. Location 2 has the external cost of a noisy environment from the tire shop, but also the external benefit of attracting potential customers due to the delicious smell and busy traffic generated by the pizza shop.

Step-by-step explanation:

External Costs and Benefits of the Location Options

Location 1: The external cost is the stinky smell from the dry cleaner, while the external benefit is the busy traffic generated by the dry cleaner, which can attract potential customers to the strip mall.

Location 2: The external cost is the noisy environment from the tire shop, while the external benefit is the delicious smell and the busy traffic generated by the pizza shop, which can also attract potential customers to the strip mall.

Answer 2

When evaluating the impact of location on their antique business, external costs and benefits at two potential locations include a stinky dry cleaner and a busy dry cleaner at location 1, meanwhile, location 2 has a noisy tire shop but benefits from a busy pizza shop and a doughnut shop with delicious smells.

Step-by-step explanation:

When considering the impact of location on Ed and Alice's antique business, certain factors adjacent to their potential locations can be categorized as external costs or external benefits:

These factors must be weighed carefully to determine which location might provide the best balance of external costs and benefits for the antique business. The pleasant aromas from the food outlets at location 2 could comprise a significant draw for customers, which is a strong external benefit.