A positive externality occurs when one person's activity makes another person better off.

Question

Quizplus · Accepted Answer

A positive externality is a benefit received by someone who is not involved in an economic activity. For example, when a person gets vaccinated, not only do they benefit from protection against the disease, but others around them also benefit from reduced risk of infection. This is a positive externality because the person getting vaccinated is making others better off without intending to or receiving any direct compensation for it.

A Positive Externality Occurs When One Person's Activity Makes Another