Which of the following is an example of an external benefit?
A) More people start to install solar panels on their roofs, and as a result, electricity use goes down as does the pollution created by the generation of electricity.
B) Firms are able to reduce their costs of production by using a more efficient technology.
C) The city spends $500,000 to upgrade the local jail.
D) A company opens a slaughterhouse at the end of your street.

Question

Quizplus · Accepted Answer

An external benefit, also known as a positive externality, occurs when a third party not directly involved in a transaction benefits from it. In choice A, the installation of solar panels by individuals not only benefits them through reduced electricity bills but also benefits society by reducing pollution, which is a classic example of an external benefit.

Which of the Following Is an Example of an External