Question

Which of the following generate the type of externality previously described?

a. Carlos has planted several trees in his backyard that increase the beauty of the neighborhood, especially during the fall foliage season.
b. The city where you live has granted a permit to put a movie theater in your neighborhood, causing traffic jams at night and on weekends.
c. A leading electronics manufacturer has discovered a new technology that dramatically improves the picture quality of plasma televisions.
d. Firms of all brands have free access to this technology. Your roommate Felix has bought a bird that keeps you up at night with its chirping.

Answer 1

Positive externality

Negative externality

positive externality

negative externality

Step-by-step explanation:

A good has positive externality if the benefits to third parties not involved in production is greater than the cost. an example of an activity that generates positive externality is research and development. Due to the high cost of R & D, they are usually under-produced. Government can encourage the production of activities that generate positive externality by granting subsidies.

A good has negative externality if the costs to third parties not involved in production is greater than the benefits. an example of an activity that generates negative externality is pollution. Pollution can be generated at little or no cost, so they are usually overproduced. Government can discourage the production of activities that generate negative externality by taxation. Taxation increases the cost of production and therefore discourages overproduction. Tax levied on externality is known as Pigouvian tax. Government can regulate the amount of externality produced by placing an upper limit on the amount of negative externality permissible