Question

Which statement describes a positive externality? Sam dug a pond, so he could go fishing, but the pond has contributed to an explosion of mosquitoes in your neighborhood. Sam buys a dilapidated house, renovates it, and increases the property values of all the houses in the neighborhood. Sam has dozens of cats, and they come into your yard to hunt the birds that come to your birdbath. Liquid waste from Sam's chicken farm flows into a neighbor's well water.

Answer 1

Sam buys a dilapidated house, renovates it, and increases the property values of all the houses in the neighborhood.

Step-by-step explanation:

In economics, the concept of positive externality refers to the situation that takes place when the production of a good causes some other benefits to third parties who were not involved in the transaction. In other words, we are talking about a benefit who is enjoyed by someone else as a result of another's person action.

When Sam buys a dilapidated house and renovates it, it increased the property values of all the houses in the neighborhood. Thus, the neighbors now have higher property values, therefore, they are enjoying a benefit that is the result of Sam's house renovation. Thus, this is an example of a positive externality.