Multiple Choice
Which of the following statements is true about measuring positive externalities of education?
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7. Externalities
Externalities: Social Benefits and Social Costs
Multiple Choice
Which of the following activities generates a positive externality?
A
Getting vaccinated against a contagious disease
B
Driving a car that emits air pollution
C
Dumping waste into a river
D
Smoking cigarettes in public places
Verified step by step guidance1
Understand the concept of an externality: An externality occurs when a person's actions affect the well-being of a bystander and this effect is not reflected in market prices. Externalities can be positive (beneficial) or negative (harmful).
Identify the nature of each activity: For each activity, consider whether it creates benefits or costs for others that are not accounted for by the person undertaking the activity.
Analyze 'Getting vaccinated against a contagious disease': This action not only protects the individual but also reduces the chance of spreading the disease to others, providing a benefit to society beyond the individual. This is a positive externality.
Analyze the other activities: 'Driving a car that emits air pollution', 'Dumping waste into a river', and 'Smoking cigarettes in public places' all impose costs on others (pollution, health hazards) without compensation, which are negative externalities.
Conclude that the activity generating a positive externality is 'Getting vaccinated against a contagious disease' because it creates benefits for others beyond the individual who gets vaccinated.
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